In the past, discounts given to shippers were primarily based on weight, zone, or even level of service. Carriers soon realized giving shippers large discounts, at low spend levels, didn’t favor the carrier. Revenue-based incentives were introduced to compel shippers to increase their shipping spend with a particular carrier. FedEx refers to their incentive program as Earned FedEx Discounts. This post includes a breakdown of how FedEx calculates and invoices incentives.
This article is part of the Simplifying carrier agreements series intended for shippers and resellers better navigate the complicated world of parcel shipping. Read more.
Making sense of Earned FedEx Discounts
The Invoice Summary located on page one of a FedEx invoice will show you the shipping discounts at a high-level and categorized by shipping type (e.g. FedEx Express Services and FedEx Ground Services). Before we look for earned discounts, we need to confirm the base rate is accurate. The base rate appears on the invoice as Transportation Charges. FedEx uses gross spend, the Transportation Charges line item, to calculate discounts and no accessorial fees or surcharges are used in the calculation. In the screenshot below, the blue dots identify the different applicable discounts you will see on an invoice. The green dot under the small print at the bottom shows the sum of the discounts for that billing period.
Service Type Summary
You’ll see in the screenshot below, Discounts show a negative charge as they are part of the calculation that reduces the Transportation Charge on the invoice. These dollar amounts reflect the discounts found in the negotiated carrier agreement. Fees and fuel surcharges are added separately and are incorporated into the Total Charge. The Service Type Summary beginning on page three of a FedEx invoice shows the shipper debits and credits by each service type (e.g. Ground-Prepaid, Ground-Home Delivery, SmartPost). The total charge at the end of the Service Type Summary section should match the Total This Invoice line item found on page one of the FedEx invoice.
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