FedEx Calculates Incentives Discounts

How FedEx calculates earned discounts

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.


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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

Invoice Summary

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. 

FedEx Summary Page Invoice

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.

FedEx Earned Discounts Carrier negotiation

FedEx Service Type Summary Discount page

Shipment Detail

Unlike UPS, where the shipper has to do extra math to calculate individual discounts on shipments, FedEx makes it easy on shippers to see incentives. Each shipment has discounts attached as a line item as you can see in the screenshot below. The Shipment Detail portion of the invoice follows after the Service Type Summary section and will explain the discounts and charges on every specific shipment.

Shipment Detail FedEx Invoice

 

Revenue Threshold

When reviewing your FedEx Earned Discounts options, you will notice that they set ascending Annualized Base Transportation Charges. These monetary ranges show how much transportation spend you must produce for FedEx on an annual basis in order to qualify for specific incentives. As your spend expands, you will see an incrementally higher Earned Discount.  Let’s say your FedEx invoice shows a transportation spend of $20,000. By multiplying this spend by 52 weeks, you can calculate the approximate transportation spend per year and identify the potential discount bracket your account falls under to figure out the savings percentage.  The revenue threshold language is shown in small print directly above the sender and receiver information on the Shipment Detail section.  

 

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