Incentive-Based Rating

Incentive-based Rating

Incentive-based rating is a promotional program that parcel or freight carriers may offer to shippers to secure their business, in the form of price incentives or discounts for committing to ship a certain amount of their package volume with that carrier. You may be able to significantly reduce shipping costs by negotiating incentive-based rating programs with one or more of your parcel carriers.

For example, your contract with “Carrier A” stipulates that if you ship between 1-x number of ground service packages in a 52-week rolling average, then you will continue to receive a 10% discount on every ground package you ship. The critical factor is ensuring that the package volume committed to in the contract is met. 

Incentive-Based Pricing Risks

If you do not reach that contractual volume threshold, then you will not receive the discount and you could be penalized. For this reason, it is important to maintain an ongoing, accurate count of your actual shipping volume, in an automated manner.

Your shipping system should include the functionality to help you reach the threshold to receive those carrier incentives/discounts. Multi-carrier shipping systems such as CLS InfoShip®/Vx make it easy to create and embed business rules that are automatically applied during shipment processing to choose that specific carrier and service until the contractual threshold is met. 

Best Practices to Ensure Contract Levels Are Met

Carrier freight contracts can be complicated and vary for each carrier that you use for parcel and shipment delivery. Manually keeping track of carrier contract requirements and shipping volumes is time-consuming, error-prone, and may prevent your company from meeting the required thresholds. A better practices is to configure your shipping system to do the work of maintaining a percentage tolerance to help you meet your contracted carrier volumes to maintain your carrier discounts.

CLS Recommendations

Our shipping support staff has extensive experience working for and with all the major carriers and we are familiar with contracts and the importance of keeping volume-based incentives. We recommend the following tips to achieve the best results with your carriers.

• Establish a good relationship with your carrier account manager. Have regular meetings with them to review your volumes, your negotiated rates, when any incentives will kick in, or when they could end.
• Review your carrier contract in detail to clarify which services are part of the incentive program. Some services may have a nice incentive for certain volumes, but other services that you ship with might impact those specific incentives negatively.
• Ask questions and ask for discounts! Do not take an account manager’s word for what is in your contract no matter how many gifts or lunches they bring.
• Reconcile your invoices against your contract on a regular basis. Carriers can sometimes make billing mistakes that could cost you!
• Choose a multi-carrier shipping software like InfoShip/Vx that is designed to help you meet and exceed your business goals. If you have questions about setting up such functionality, we’re here to help.

Learn More

Creative Logistics Solutions has helped many customers utilize outbound consolidation strategies for domestic and international shipping with our InfoShip/Vx multi-carrier shipping software solution. Please contact us for a quick chat if you’d like to explore ways to automate shipping processes, reduce labor costs and increase productivity in your shipping operations.

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