Shipmint 101: How to Calculate FedEx and UPS Minimums
  • February 17, 2020
  • Staff Report

Shipmint 101: How to Calculate FedEx and UPS Minimums

One of the most continuously misunderstood aspects of small package shipping costs is the role of Minimum Charges.

A quick Google search will yield bevy of lengthy explanations, generally told from the perspectives of vendors hoping shippers will follow their breadcrumb trails of blog content right into the top of their sales funnels.

In fairness, while a “Minimum Charge” may sound unambiguous, reality is decidedly less straightforward.

The concept seems simple enough.

“I’ll never pay less than this amount. Duh.

But if there’s anything shippers should know by now it’s that in the wild world of shipping costs, things are rarely as they seem.

Fortunately, basic math has been relatively constant for the last couple thousand years or so, and that’s really all you need to know to master minimums on your own.

But before you break out your abacus, it will help to reach a state of Minimum Charge Chi:

      1.    Close your eyes.
      2.    Take a deep breath.
      3.    Say “Base Rates” out loud three times.

In all seriousness, in order to understand Minimum Charges, you must first understand the difference between Base Rates and ancillary fees (surcharges, duties, taxes, etc.)

Base Rates are the rates listed in each carrier’s service guide, which anyone can easily download online.

Only once you’re able to separate Base Rates from all other charges can you truly focus on exactly how Minimum Charges work.

 

Minimums are the starting point, not the finish line.

Minimum Charges are NOT the lowest amount you will pay for a package. If that sounds counterintuitive, that’s because its. Think of them instead as the lowest point from which all subsequent charges will be added to a shipment’s cost.

Unless there is a section within your carrier agreement that references Minimum Reductions (more on those later) you can find the “published” Minimum Charge Amounts by looking at your carrier’s rate guide and finding the one-pound price for each service.

Or, for your convenience, the most common published Minimum Charge Amounts for each carrier are listed in the tables below:


FedEx Service
Minimum Charge
UPS Service

FedEx First Overnight

$60.31 $60.62

UPS Next Day Air Early

FedEx Priority Overnight

$30.31 $30.62

UPS Next Day Air

FedEx Standard Overnight

$28.24 $28.39

UPS Next Day Air Saver

FedEx 2Day A.M.

$20.47 $20.68

UPS 2nd Day Air A.M.

FedEx 2Day

$19.11 $19.30

UPS 2nd Day Air

FedEx Express Saver

$16.85 $11.67

UPS 3 Day Select

FedEx Ground

$8.23 $8.23

UPS Ground (Commercial)

FedEx Home Delivery

$8.23 $8.23

UPS Ground (Residential)

FedEx SmartPost* (Ounces)

$8.23 $8.58

UPS SurePost* (Ounces)

FedEx SmartPost* (Pounds) $8.23 $8.64

UPS SurePost* (Pounds)

*Contract-only service. Rates for these services are not contained in standard published rate guides.


The rates listed in the table above represent the published Minimum Charge Amounts for each carrier’s most common services.

A shipment’s Base Rate is determined locating the rate that corresponds with a shipment’s weight, zone and service type within the service guide, and then subtracting service-level contract incentives (Earned Discounts, Base Discounts, Grace Discounts, Automation Discounts, Tier Discounts, etc.)

The Base Rate for the package is the net rate or the Minimum Charge Amount, whichever is greater.

Let’s use a 10-pound, Zone 4 package shipped via a ground service to illustrate that explanation with each carrier.


FedEx Ground
Cost Factors
UPS Ground

Base Rate

$13.27 $13.27

Base Rate

Earned Discount*

10% off 9% off Tier Discount*
Base Discount* 35% off 36% off

Base Discount*

Expected Discount*

45% off 45% off Expected Discount*

Calculated Base Rate

$7.30 $7.30 Calculated Base Rate

Minimum Charge

$8.23 $8.23

Minimum Charge

Net Base Rate $8.23 $8.23

Net Base Rate

Actual Discount*

38% off 38% off

Actual Discount*

*Hypothetical discounts for demonstration purposes. Refer to carrier agreement for account-specific incentives.


Minimums Reduction Amounts are negotiable.

Both carriers offer Minimum Reduction incentives within contractual agreements with volume shippers. Traditionally, these incentives are listed in tables, with dollar amounts given off the published Minimum Charge for the corresponding services.

These incentives are important since they lower the Base Rate floor, allowing customers to realize more of the service-level incentives for shipments in which the minimum comes into play. In the table above, for example, a $1 Minimum Reduction would allow the customer to achieve the full 45% Expected Discount, as shown below:

FedEx Ground
Cost Factors
UPS Ground
Base Rate $13.27 $13.27

Base Rate

Earned Discount*

10% off 9% off Tier Discount*
Base Discount* 35% off 36% off

Base Discount*

Expected Discount*

45% off 45% off Expected Discount*
Calculated Base Rate $7.30 $7.30

Calculated Base Rate

Published Minimum Charge

$8.23 $8.23

Published Minimum Charge

Minimum Charge Reduction*

$1.00 $1.00

Minimum Charge Adjustment*

Minimum Charge

$7.23 $7.23 Minimum Charge
Net Base Rate $7.30 $7.30

Net Base Rate

Actual Discount*

45% off 45% off

Actual Discount*

*Hypothetical discounts for demonstration purposes. Refer to carrier agreement for account-specific incentives.


Minimums are not relevant for every shipper.

While the individualized nature of e-commerce shipments continues to shift the characteristics the common package toward smaller box sizes and lighter weights, it’s important to remember that minimums do not impact all shipments.

A good rule of thumb is that lighter shipments and/or higher discounts merit a close comparison of your net Base Rates. Lighter, because they have lower Base Prices to begin with and therefore don’t require deep discounts to bump up against Minimum Charges, and higher discounts because they can subtract so much from the published Base Rate that they hit the Minimum Charge Amount.

Once the Base Rate is determined in the manner above, only then are subsequent charges (some of which may carry their own incentives) are added to determine the cost of the shipment.

Shippers who understand Minimum Charge Amounts can save thousands on shipping costs simply by having the awareness to guide conversations with their carrier about how and why these incentives would impact their bottom line.


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