Carrier Money Back Guarantee Update

The attached post is great information from Stewart Reynolds regarding FedEx expanding their Money Back Guarantee (MBG) waiver/delivery time extensions, during the holiday season. There are numerous factors driving this behavior from FedEx.

•       It’s getting harder and more costly to manage the on-time delivery of growing holiday shipment volume.
•       FedEx is struggling right now financially and must extract cost wherever they can. Paying back shipping revenue resulting from late delivery can cost a lot of money.
•       There are now hundreds of Money-Back-Guarantee refund companies whose focus is to electronically manage the shipper based MBG claims process for a fee and profit from late delivery, even if a shipment is only a few minutes late and resulting in no harm or damage to the recipient.

As a defense against growing MBG claims/cost exposure, both UPS and FedEx are removing the Money-Back-Guarantee when a shipper requests to renegotiate their rate program, which results in a new pricing agreement. I understand why the carriers must reduce their MBG cost exposure as more shippers make more refund claims, even for marginally late delivery with no negative consequences. However, this trend can’t be good in the long-term for driving on-time delivery behavior by the carriers if a smaller percentage of shipments are subject to this penalty for late delivery.