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Who else wants to know how UPS calculates incentives?

Calculate UPS incentives

Calculating UPS incentives on a per shipment basis requires a multistep process, due to the fact that incentives are aggregated by service type (i.e. Ground or 2nd Day Air) and the transportation spend for that service type for the given time period.

Why do incentives matter?

It is beneficial for a shipper to understand incentives to ensure negotiated rates within the carrier agreements are compliant and to benchmark discounts between common carriers on a granular level.

Making sense of UPS incentive calculations

Each carrier manages incentives differently. In the case of UPS, incentives are detailed near the beginning of the PDF invoice, typically at top of the Outbound charges within the  Incentives section of the invoice.

Each Incentive Credit listed within the Incentives section of a UPS invoice is defined by a seven digit ID (e.g. AWDRXSK). This ID is unique to each incentive posted to an invoice and contains several key pieces of information specific to that incentive.

The screenshots below showcase some of the information specific to each incentive.

UPS incentive invoice UPS invoice incentives

Incentive Plan. 
All incentive credits applied to an invoice based on the carrier agreement.

Incentive Credit. The discount applied to the invoice as a credit according to the Incentive Plan.

Incentive Level. The shipments of a particular service type during a defined period.

Published Charges. The total charges for all shipments of a particular service type during the defined period.

Count. The number of shipments included within an incentive credit.

Revenue. Tier incentive based on revenue (i.e. spend) during the defined period.

Date range. Includes all shipments from the given date range.

Dividing the Incentive Credit by Count will yield the average Incentive Credit applied to each shipment included in an Incentive Credit. You’ll notice in the screenshots the first line item displays a count of 14. That means you would need to divide the Incentive Credit (e.g. -$624.45) by the number of shipments of that service type (e.g. 14 shipments were sent Next Day Air Commercial) to find the average incentive per shipment. Rather than showcasing the discount from incentives on each individual shipment, the incentives section of each invoice only supplies a sum of the total transportation spend. Further analysis can be done to individually analyze each component of an incentive.

Here are the steps:

  1. Identify Incentive Credit per shipment
  2. Find the shipments where the incentives are applied.
  3. Attach the incentive per shipment those shipments to get the net spend on a shipment (the debits and credits).

Why this information is useful:

Makes it easier to compare carrier rates. FedEx shows discounts on each shipment, but with UPS we need to find out what the true cost is on a shipment in order to compare the two.

Ensures that all incentives within the carrier agreement are accounted for.

Beware of decreased transportation spend

Revenue-based incentives can backfire. If your gross spend decreases during the week, you could lose a significant amount of money depending on the pricing tier your new spend falls under. It’s important to keep track of this spend and have ongoing dialogues with your carrier to restructure pricing tiers to protect your business from losing the discounts.

Share a Refund has the industry-leading tools to analyze current spend and the incentives discounted on each package, which is an essential component in ensuring the carriers are compliant with negotiated rates in existing contracts. Through our Carrier Agreement Optimization service, Share a Refund negotiates the shipping rates that your business deserves. For more details on the analysis Share a Refund performs and the cost-reducing results, please contact Share a Refund by pressing here.

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