Parcel - March/April 2009 - (Page 11) Common misconceptions about revenue thresholds include: • All services are included. False — Unless the specific service is recognized in the revenue threshold area of your contract, the money spent on that service is not included. Common exclusions; imports, NDA Early A.M., intra-HI, etc. • All package types are included. False — The package type will not be included in the calculation unless the specific type is included the contract verbiage. • The weekly rolling average is adjusted for my company’s recognized ship days. False — The calculation does not account for shipper downtime or company holidays not recognized by the carrier. shipments only. Unless your contract identifies “$0.00” MPC for a given service, assume your MPC equals the published MPC. Package Types The quantity of package types within carrier billing practices almost surpasses the number of services offered. FedEx currently utilizes no less than eight autonomous ‘package types’ (i.e. OB, IB, 3P, RB, PRP, ZJ, RM, and TB). Shippers falsely assume that service incentives apply to all package types; however, this could not be further from the truth. Carrier invoices will strictly adhere to carrier contracts. Unless your contract states that incentives apply to each package types, they won’t. We have seen shippers flush millions down the drain simply by failing to negotiate incentives for all package types. Revenue Thresholds A popular method used by carriers to maximize shipper volume is to provide incremental discounts for incremental business. While all shippers want to be rewarded for generating more volume, there is more to these revenue thresholds than meets the eye. Though the threshold structure appears rather simplistic, many factors contribute to the revenue calculation. A shipper’s threshold is typically applied each week by determining the shipper’s average weekly gross revenue over a period of time (typically 52 weeks). While it’s widely understood that accessorial charges are not included in the calculation, there may be some things you didn’t realize regarding the calculation logic. See, the devil really is in the details. n Mitch Felts is the President & CEO of Distribution Management Group, Inc. (DMG). For more information, visit www.dmgincorporated.com or email mitch@ dmgincorporated.com. MARCH 2009 | www.PARCELindustry.com 11 http://www.dmgincorporated.com http://www.dmgincorporated.com http://www.dmgincorporated.com http://www.PARCELindustry.com
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