By Brittany Beecroft
Vice President, AFMS
Vice President, AFMS
We invest time, resources, and money into negotiating our contracts. But are we dedicating the same attention to our carrier invoices? How do we know what we negotiated is what we are actually receiving? In a world of effective incentives, dim weights, and ground residential fees, understanding the invoice is equally important as understanding the agreement.
Base Rate
Before we look for discounts, we need to confirm the base rate is accurate. Most shippers fall under the current year’s service guide. However, if you are the select customer who received a custom list rate, this is stop #1 on your invoice. On the UPS invoice, the rate is called “Published Charges;” FedEx is “Transportation Charge.” Doesn’t hurt to do a quick spot check every quarter to verify the charge. Base rates and data often get overlooked in importance, but they are two key triggers to incorrect savings and invoice overages.
Net Rate
We pay it — do we understand it?
For FedEx, we’ll look at a few areas — Earned Discount, Performance Pricing, and Fuel. If you assessed a fee, the charge would appear here as well. Earned Discount and Performance Pricing show a negative charge as they are reducing the Transportation Charge (Base Charge). They reflect the discounts found on your agreement. Fuel and Fees are additive to the net Transportation Charge. The amount you’ll pay is the “Total Charge.”
For UPS, we see "Incentive Credit." So we’ll see each published rate reduced (versus the net fees with FedEx). "Billed Charge" is your net charge, with "Total" being the amount you’ll pay. We can verify Incentive Credit against the agreement to compare the contract discount with the effective discount.
So we did some simple math to reduce the base rate and produce a total charge. But what drove those charges? How do we know what Earned Discount incentive to use? How do we know if our package was rerated for weight? FedEx and UPS provide that information to us — we just need to know where to look.
Tier Discount
Agreements are set up to reward shippers for gross transportation spend. And carriers put this spend on your invoice to track tiers and discounts. When we talk about falling off tier, but we don’t know how close to the next threshold we are, we simply need to reference our invoice against our agreement. For UPS, we see average weekly revenue, along with the date range, shown below the Published Charges/Incentive Plan. Because the UPS agreement is generally set up with weekly tiers, the invoice reflects the same spend. FedEx tends to mirror its agreement structure, as well, showing the annualized revenue threshold. The threshold language is shown in smaller print directly above the sender/receiver information, which is next to the charges we previously reviewed. Look at the listed tier, cross-reference on your agreement for the corresponding discount, reduce the base charge by this amount — and do a quick scan of your entire threshold structure to make sure you aren’t dollars away from dropping to a lower tier and losing discount.
Billed Weight
Like the tiers, invoices are a great tool to understand your data and shipping trends better — all provided to you by the carrier.
On the UPS invoice, we want to scroll down to “Adjustments & Other Charges.” Here we’ll see which packages rerated on dimensional weight. UPS shows customer entered dimensions and audited dimensions, as well as the rerated weight and new charges. That new charge is your net charge to be paid, regardless if you billed your customer on actual weight.
For FedEx, we see the rerate within the “Charge” section: actual weight versus rated weight. If the two weights show a significant gap, we have work to do on the divisor, the minimum, and/or the actual packaging.
Base Rate
Before we look for discounts, we need to confirm the base rate is accurate. Most shippers fall under the current year’s service guide. However, if you are the select customer who received a custom list rate, this is stop #1 on your invoice. On the UPS invoice, the rate is called “Published Charges;” FedEx is “Transportation Charge.” Doesn’t hurt to do a quick spot check every quarter to verify the charge. Base rates and data often get overlooked in importance, but they are two key triggers to incorrect savings and invoice overages.
Net Rate
We pay it — do we understand it?
For FedEx, we’ll look at a few areas — Earned Discount, Performance Pricing, and Fuel. If you assessed a fee, the charge would appear here as well. Earned Discount and Performance Pricing show a negative charge as they are reducing the Transportation Charge (Base Charge). They reflect the discounts found on your agreement. Fuel and Fees are additive to the net Transportation Charge. The amount you’ll pay is the “Total Charge.”
For UPS, we see "Incentive Credit." So we’ll see each published rate reduced (versus the net fees with FedEx). "Billed Charge" is your net charge, with "Total" being the amount you’ll pay. We can verify Incentive Credit against the agreement to compare the contract discount with the effective discount.
So we did some simple math to reduce the base rate and produce a total charge. But what drove those charges? How do we know what Earned Discount incentive to use? How do we know if our package was rerated for weight? FedEx and UPS provide that information to us — we just need to know where to look.
Tier Discount
Agreements are set up to reward shippers for gross transportation spend. And carriers put this spend on your invoice to track tiers and discounts. When we talk about falling off tier, but we don’t know how close to the next threshold we are, we simply need to reference our invoice against our agreement. For UPS, we see average weekly revenue, along with the date range, shown below the Published Charges/Incentive Plan. Because the UPS agreement is generally set up with weekly tiers, the invoice reflects the same spend. FedEx tends to mirror its agreement structure, as well, showing the annualized revenue threshold. The threshold language is shown in smaller print directly above the sender/receiver information, which is next to the charges we previously reviewed. Look at the listed tier, cross-reference on your agreement for the corresponding discount, reduce the base charge by this amount — and do a quick scan of your entire threshold structure to make sure you aren’t dollars away from dropping to a lower tier and losing discount.
Billed Weight
Like the tiers, invoices are a great tool to understand your data and shipping trends better — all provided to you by the carrier.
On the UPS invoice, we want to scroll down to “Adjustments & Other Charges.” Here we’ll see which packages rerated on dimensional weight. UPS shows customer entered dimensions and audited dimensions, as well as the rerated weight and new charges. That new charge is your net charge to be paid, regardless if you billed your customer on actual weight.
For FedEx, we see the rerate within the “Charge” section: actual weight versus rated weight. If the two weights show a significant gap, we have work to do on the divisor, the minimum, and/or the actual packaging.
