As a potential buyer of FedEx routes, one of the hardest things to understand is the language of FedEx. To help you get up to speed on FedEx routes, we have created a handy FedEx terminology “cheat sheet” for you. Here are some of the most common words and acronyms you will come across as you dig in and learn more about FedEx, routes and the entire FedEx ecosystem:
General FedEx Terms:
- ISP: Independent Service Provider
- ISP is the new term for a FedEx contractor who is operating under FedEx’s new ISP agreement
- Each ISP agreement will have its own unique ID number
- A company, or entity as FedEx calls them, can have more than one ISP contract
- ISP Agreement:
- The ISP agreement is being rolled out nationwide and will be completed by summer 2020. Under the ISP agreement, FedEx has mandated that contractors have a minimum number of stops/day or PSAs (defined below) to continue to do business with FedEx. Historically, this has been 500 stops/day or 5 PSAs, but is subject to local terminal variances
- Instead of PSAs, the ISP agreement now uses the acronym “CSA” to describe the route area.
- CSA: Contracted Service Area
- Under an ISP agreement, a FedEx contractor owns and operates a CSA. The contractor has the contractual obligation to provide both pick up and delivery services within the CSA. A CSA can be defined by zip codes or streets.
- A contractor has the right to sub contract out stops or areas of a CSA to another contractor.
- A CSA will be identified by a unique 6 digit number
- PSA: Protected Service Area
- Under the IC agreement (described below), one PSA was considered one route.
- IC: Independent Contractor
- The IC or Independent Contractor model, while still in existence in certain markets, will be going away by June 2020
- An IC could have as few as 1 PSA or as many as 100 PSAs, but each route or PSA effectively had its own contract with FedEx
- WA: Work Area
- Within the terminal each route is considered a WA or Work Area
- Each WA will include a unique number such as WA 479
- Entity ID
- Your company will have its own unique ID number to identify it
- ILS: Inbound Local Service
- ILS is the metric FedEx tracks to grade your performance
- Quoted as a % of total packages successfully delivered
- Per ISP contract standards, an ISP must consistently attain an ILS of 98.5% of the terminal or district average, which ever is higher
FedEx Financial Terms:
- Settlement
- The settlement sheet is the weekly sheet provided by FedEx to the contractor showing how much the contractor earned for the week of service
- Service Charge
- This is a fixed weekly payment from FedEx to the contractor to provide service within the CSA
- It is a negotiated amount
- It can be found under “Other P&D Charges” on the weekly settlement sheet
- Brand Promotion
- Under the ISP agreement, FedEx pays contractors a weekly brand promotion fee
- Contractors can either opt in/out of payment -> this is a negotiated program
- If contractors opt in, contractor assures FedEx vehicles will be decaled and employees will be wearing FedEx branded uniforms
- Vehicle brand promotion is paid on a per vehicle/week basis
- Uniform brand promotion is a flat weekly rate
- CSI: Customer Service Incentive
- Every 4 weeks, FedEx pays a CSI through the contractor settlement
- CSI is a “bonus” determined by 3 parts:
- Inbound Local Service
- Pick Up performance (Early/Late/Missed)
- Customer Complaints
- The CSI is a negotiated number and resets every 4 weeks -> for every service issue listed above, this will reduce the available bonus to you.
- For example, if you had a customer complaint in the month, a set amount of money will be deducted from your monthly bonus pool
- Safety Incentive
- Like the CSI, the Safety Incentive is a negotiated item which is paid every 4 weeks
- Like the CSI, it is a set amount every 4 weeks with accidents/other safety violations deducted from the bonus pool
- As an example, lets assume your 4 week bonus is $10,000 and you have 10 vehicles. If a driver gets into an accident deemed his/her fault, FedEx will deduct $1,000 from your bonus ($10,000/10) for 3 months ($3,000 total)
- Stop Charge
- The rate FedEx pays you for every completed stop
- It is a negotiated amount
- Package Charge
- Similar to Stop Charge, this is the rate FedEx pays you for every package delivered
- As such, each stop will generate both stop and package revenue
- It is a negotiated amount
- Fuel Surcharge
- This is paid on a per stop basis, but is dependent on current benchmark fuel prices
- The base rate is negotiated, but will fluctuate up and down depending on fuel cost
- Surge Stop Charge
- Under the contract, FedEx negotiates a threshold stop count
- Any stops completed above and beyond the threshold, the ISP will get paid both a stop charge along with a surge stop charge
- This is a way for FedEx to incentivize ISPs to bring on more capacity
- It is a negotiated rate