What is Carrier Volume Balancing?

Posted on Dec 27, 2017 By kbormann Share:

ProShip explains how Carrier Volume Balancing works and best practices.

Did you know that most parcel agreements signed over the past ten years typically contain some form of revenue-based incentives? UPS calls them “Portfolio Tier Incentives” while FedEx calls them “Earned Discounts,” but the concept is the same. These incentives, or discounts, are partially dependent on how much you spend with the carrier.Download Carrier Complaince eBook

Many customers want to ensure that upon shipping, they will maintain a particular discount tier with their carrier. If you neglect to reach your shipping threshold with a specific carrier, your discounts could be at stake. Carrier Volume Balancing is how to counteract that. To check your volumes, you need a special rate shop group, “duration of look back” and “frequency of look back”. Here’s what that means.

Rate Shop Groups

For shipments that will be biased towards a carrier in question, there needs to be special rate shop groups that take into account all carriers and services, as well as only services from that specific carrier.

This means that a customer may have a general rate shop group that has all carrier ground and 2-day services. But they may also have groups that only contain UPS and FedEx ground and 2-day services respectively.

Duration of Look Back

To determine if a shipment should use a biased rate shop group, the system needs to know how far back to look at the total carrier spend. Carriers typically use a rolling 52-week average to determine which pricing tier to put a company in, so customers might want to configure the number of weeks to look back on a per-carrier basis.

It is recommended that a separate table be used to keep weekly spend summaries such that they do not have to be processed for every shipment. Make sure you are hitting week/month quota to confirm that you’re on track per carrier basis.

Frequency of Look Back Calculation

Some customers may want the look back calculation to run for every shipment. Others may want the calculation to run differently. Options could include: every shipment, hourly bands, AM/PM bands, and only shipments containing a particular item.

In order to ensure that your discount tier will not be jeopardized based on per carrier volume, companies should enable Carrier Volume Balancing Business Rules. Get in touch with a ProShip shipping expert to learn more!

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