The Minimum Charge represents a price floor set by the carriers so they can ensure they can still cover their operational cost in spite of you having discounts on your agreements. As an impact, regardless of whatever your discount percentage is on that service, your net charge for that package will never go below. preventing you from taking full advantage of their discount in their agreement, but allowing Carriers to cover basic operational costs like fuel, labor, and overhead, even when shipping smaller or lightweight packages that would otherwise generate very low revenue
Take this as a simple example:
You have a package that costs a list rate of $10.
You have a 50% discount on that $10 package.
You would expect that your net rate for that package would be $5, but the carrier has a Minimum Charge for that service of $7.
Hence you will be paying $7 instead of $5
In this scenario, you’re actually only realizing a 30% discount, and you’re paying $2 per package more than you would expect given that you have a 50% discount.
This is a particularly important metric to take into consideration when negotiating your carrier agreement because if you have lightweight packages that don’t travel very far, then you’ll hit the Minimum Charge more often. The carrier could offer you better percentage discounts on their services, but that won’t do anything to help you lower your costs because of that Minimum Charge. And one good thing to address this is the negotiation of the Minimum reduction on the carrier agreement.
Here's the Article to learn more about Minimum Reduction:
Reveel makes it easy for you to understand how much this impacts your business and shows you how you’re doing in managing this vital metric with this VitalFactors™ card.
Minimums Graph:
This illustrates how many of your shipments are hitting the Minimum Charge Amount by Package count and by Net spend. It also shows the Unrealized savings on each impacted service. Hovering your pointer on the Minimums Hit Count will show you the percentage that is hitting the Minimums in that service level.
Over time Graph:
This shows your weekly percentage hitting the Minimums. Hovering your pointer on the line chart will show you the percentage that is hitting the Minimums on a weekly view. You can choose the specific service level that you would like to see by clicking the "All Services" drop down option on the upper right.
