UPS and FedEx take steps to partially reinstate service guarantees

Not long after the onset of the COVID-19 pandemic, in March 2020, the global parcel duopoly of UPS and FedEx respectively suspended service guarantees, due to rapidly changing, and unprecedented, market conditions, brought on by the pandemic, which saw more people buying goods online, at a time when many were largely sheltering at place.

When these service guarantees were suspended—by FedEx on March 25, 2020 and UPS on March 26, 2020—the companies also eased on-time service standards on several products. And with industry observers noting that given that carriers are late 1%-5% of the time, the suspension of service guarantees were viewed as a huge additional expense to shippers in that they used to be able to file service refunds.

Now, a little more than a year later, both UPS and FedEx have announced that they each have partially reinstated service guarantees.

Earlier this month, Atlanta-based UPS said that effective April 5, its UPS Service Guarantee will be reinstated for the following products: UPS Next Day Air services (UPS Next Day Air Early, UPS Next Day Air and UPS Next Day Air Saver) and UPS Worldwide Express services (UPS Worldwide Express NA1, UPS Worldwide Express Plus, UPS Worldwide Express, UPS Worldwide Express Saver, UPS Worldwide Saver, UPS Worldwide Express Freight Midday and UPS Worldwide Express Freight).

And it also noted that until further notice, the guaranteed delivery time for UPS Next Day Air Saver deliveries has been extended to end-of-day (11:59 p.m. on the guaranteed day of delivery), with the Service Guarantee remaining suspended for all other UPS shipments from any origin to any destination.

“As the effects of the Coronavirus impact our infrastructure, we will continue to seek guidance from local, state, and national government entities to ensure that we fully align with their regulations,” UPS said in a statement. “We are committed to continue operating globally except where constrained by government restrictions.” 

Memphis-based FedEx said that effective April 6, its money-back guarantee was reinstated for select U.S. domestic and U.S. import/export shipments (for U.S. payors only), including: FedEx First Overnight; FedEx Priority Overnight; FedEx Standard Overnight; FedEx International First; FedEx International Priority; and FedEx International Priority Freight.

“In order to balance our focus on service and safety, the FedEx money-back guarantee for all other FedEx Express, FedEx Ground, FedEx Freight and FedEx Office services will remain suspended until further notice,” FedEx said in a statement. “The status of money-back guarantee for these FedEx services and additional FedEx services worldwide is being evaluated on an ongoing basis, and our focus remains on continuing to provide the best possible service to our customers during this period of uncertainty.”

A blog posting by Atlanta-based Spend Management Experts (SME), an Atlanta-based transportation, distribution and fulfillment spend management consultancy, observed that there is currently no update as to when UPS and FedEx will reinstate service guarantees for their respective ground products.

“Why FedEx and UPS reinstated just air products is not known but there’s a lot of speculation,” the blog noted. “Most likely it was about encouraging shippers to upgrade to the more expensive air products for speedier deliveries. So, why should shippers care about service guarantees? Did you experience shipping delays last year? If so, because of the suspension of service guarantees, you did not receive a refund on what you contracted with FedEx and/or UPS for on-time, guaranteed delivery services. Now however, shippers will be eligible for guarantees on these air service products, which in turn will help hold FedEx and UPS more accountable for on-time service levels. Now we wait for the return of service guarantees for Ground services. Stay tuned.”

In an interview, SME Founder and CEO John Haber explained that, in some cases, these service guarantee reinstatements are not the same as they previously were.

“For [shippers] with a commercial location, some are sending priority packages overnight so it arrives by 10:30 A.M. the next day and standard overnight is delivered by noon the next day,” he said. “For UPS, in most cases, they are delivering that stuff together. Do you really need something there by 10:30 A.M. or can you wait until noon? This is an end-of-day commitment, so there are nuances like that. It does not cover 2-day or 3-day air, ground commercial or ground residential or ground returns. It is good to have it back in place for some of the premium volume, but that is not where the majority of the shipments are.”

Haber also observed that, in the case for UPS, for its large enterprise account customers, it has been holding the line on pricing very strictly, and, in some cases, have “fired” some of these customers or are pushing through massive cost increases, which is creating a lot of friction between UPS and some of its long-term large customers.

In order to help shippers counter these situations, Haber said some alternatives they can turn to include things like working with regional carriers, postal consolidators, and the United States Postal Service (USPS), among other things.

“We are looking at doing things differently from an operations perspective so shippers are changing the way they distribute and looking at building up additional capacity in the marketplace,” he said. “The days of single-sourcing all of your shipping to UPS or FedEx should be over. We have been telling people that for more than a decade. It is going to come to a point where they [UPS and FedEx] are going to exercise all of the leverage they have over you, because you are so ingrained with them and have been with them for years and never switched and show no signs of doing so. Those are the customers they have jacked the rates up on and it is what they did in October. They went to retailers and customers that knew could not switch and had to eat the cost increases, and they leveraged them. It is basic supply and demand, and right now they are benefitting from it, with these big price increases and not a lot of additional capacity out there, nor a lot of options in the short-term. As for the long-term, it is a very risky strategy.”