Off the Cuff: How to Charge for Rush Service

Charging for rush service is justifiable, but be sure to outline  policies upfront and inform your customers.
Aug 29, 2008

By Mark L. Venit, MBA, Contributing Writer

The issues of whether and what to charge for rush service are common in the decorated apparel industry and there are valid arguments on all sides. Most companies feel they’re entitled to some degree of additional compensation for going our of their way to accommodate a rush order, for bumping other customers a notch or two back in the production line and for having to deal with the potential hazards of doing something faster than necessary. Oh, and the more sanguine reason: you CAN, if you choose, stick it to ’em when they’re on the ropes.

In general, I agree wholeheartedly that “accelerated production scheduling” is a legitimate service for which you have a sound basis for assessing additional fees. Two major exceptions are accommodating the needs of good, loyal, especially substantial customers, and running rush orders placed during slow periods. In these cases, assessing a rush surcharge lies somewhere between foolhardy and counterproductive.

What and How to Charge
Conventional wisdom calls for pricing rush services as a percentage surcharge, usually 25% to 50% higher than regular selling price. On occasion, though, I’ve seen it as low as 10% to 15%. The success rate of actually getting the order and the rush charge for those who tack on a percentage upcharge is in direct proportion to the customer's level of desperation for his order.  

Allow me to suggest a better way with which most of my clients have had success. The method is to mandate an upcharge based on work units — per 1,000 stitches or number of impressions — not the cost of the garments.

The rush fee charge for embroidery in this system is either a flat rate of $1 to $2 per garment (with a minimum fee of $25 per order) or a rate of 10 cents to 25 cents per thousand stitches. The rationale for this, when the situation does warrant a rush charge, simply is that you only have a certain amount of production capacity at any given time, and the way you expand this capacity is to extend production hours, which oftentimes requires your employees to work overtime. 

Rather than “jamming” a customer for a rush fee percentage that extorts several extra dollars per garment from the victim, you explain that the additional charge covers paying your people to work extra hours. Few customers ever argue about the policy when it’s explained as such. It’s moderate, logical and seems eminently reasonable given the request and the buyer’s motivation. 

I trust you've heard the old phrase regarding last-minute realities — “Your failure to plan does not constitute an emergency for me!” Reasonable customers don’t have to be reminded of this. The wisdom in it applies directly when it comes to rush fees and the answer comes down to what will work best and most often in winning the rush fee without losing or alienating a customer. Decidedly, a flat rate or per-million-stitch surcharge gains the customer’s acquiescence (and most of my own clients prefer this).

A few other details are important for rush orders, particularly money, approvals and communications. Anyone who has handled rush orders knows first-hand that surprises have a way of entering the picture, especially when you have difficulty or additional expense in sourcing garments, haven’t been paid in advance and can’t get hold of key decision makers.  How often have you taken a rush order, and in the process of executing it muttered to yourself that you wish you hadn’t agreed to do it? I can assure you thousands of your peers have muttered that — often in much stronger terms.

And then there’s the customer who whines about how critical fast delivery is, until, of course, he hears about the rush fee and tells you, “Well, in that case I’ll be happy with regular turnaround time.” You know this guy, don’t you?

Requiring Prepayment
The obvious solution to some of the surprises is to demand 100% prepayment. That, at least, keeps you in the driver’s seat if there’s trouble upon or after delivery. A lesser-known safeguard is to require that the customer issue a written waiver that gives you latitude to do the best you can to satisfy the customer’s paramount priority: his deadline. Or give your customer your own prepared waiver agreement (see example below) and have him sign it and return it prior to you commencing any work. If you don't get the waiver in time, you might still execute the order as best you can. However, without getting full payment in advance, you lose whatever financial control — and peace of mind —you might have had. (Yes, there are some customers with whom your long-term relationship mitigates concerns of being burned). 

Among the most important policies that enable you to assess a surcharge is having a well-defined, well-written delivery statement or guarantee. Typically, smart companies advertise that orders are delivered within, say, “X working days from approval of art/digitizing preparation” or whatever timeframe one elects to propose for most orders.  You might add terminology with it, though, that says “…subject to prompt customer approval of preparatory materials” or “after receipt of inventory” or other real-world considerations you choose to share with your buyers.

Below is the suggested text of how your rush service policy should be written. You should, of course, modify it to conform to your policies or marketing and production considerations. What you’re about to read has been practiced by my clients for 30 years — without a single lawsuit, without any negative reaction, without losing a single customer. The waiver portion of the text below is derived from similar wording that advertising agencies use for rush situations. [Editor’s Note: Impressions readers are authorized by Mark Venit to reproduce the language below verbatim without prior approval or attribution.]

“RUSH SERVICE” — OR — “IMMEDIATE PRODUCTION PRIORITY” 

IMMEDIATE PRODUCTION PRIORITY MAY BE ASSIGNED TO ORDERS SUBJECT TO CRITICAL DEADLINE COMMITMENTS, ESPECIALLY THOSE REQUIRING LESS THAN (specify number of) WORKING DAYS’ SERVICE.  CONTACT SALES OFFICE AT ONCE, ADVISING US ON STYLES, EMBROIDERY SPECIFICATIONS, AND SHIPPING CONSIDERATIONS.  IF WE AGREE TO PRODUCE YOUR ORDER, A SURCHARGE OF ($.X PER 1,000 STITCHES / $.X PER IMPRESSIONS / $X PER UNIT) WILL BE MADE WITH A MINIMUM SURCHARGE OF $25.00 PER ORDER. ADVANCE PAYMENT (IN FULL) MAY BE REQUIRED, INCLUDING ESTIMATED FREIGHT CHARGES AND POSSIBLE PREMIUM CHARGES FOR OUT-OF-STOCK / SPECIAL-ORDER MERCHANDISE. IF PRODUCTION SCHEDULE PRECLUDES APPROVAL OF SAMPLES OR PRELIMINARY ARTWORK OR DIGITIZING, YOUR PURCHASE ORDER MUST INCLUDE THE FOLLOWING WAIVER:

“NO PROOFS REQUIRED. EXECUTE ORDER, GRAPHICS AND LETTERING INSTRUCTIONS, TECHNICAL SPECIFICATIONS, THREAD COLORS, GARMENT STYLES AND SIZES AS CLOSELY AS POSSIBLE TO MEET DEADLINE COMMITMENT.”

Certain phrases in this sample policy merit closer inspection and emphasis:

“IF WE AGREE TO PRODUCE YOUR ORDER” — You get a little respect here by reminding the customer you don’t have to do orders like this if you jolly well please not to.
“ADVANCE PAYMENT (IN FULL) MAY BE REQUIRED” — This should get some attention.  “MAY” usually means “WILL,” except for existing customers with good payment history. If the guy who needs the rush order doesn’t fit the profile here, require full payment up front or he can opt to find someone else foolish enough to do his order on more liberal credit terms. 
“NO PROOFS REQUIRED” — This means you ain’t gonna do any if you ain’t got the time or the room to maneuver. Why ask for trouble?

The next time you get a rush order, you might dig out this column. Better yet, copy the legalese above and implement the policies right away. The longer you wait, the more compromised you’ll be the when a customer puts the heat on you for a miracle.

Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines, Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He also is the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. He will be teaching a new all-day workshop, "Getting to the Next Level: Surviving and Thriving in Good Times and Bad," at ISS Fort Worth. You can reach him at markvenit@cs.com.

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Off the Cuff: How to Charge for Rush Service
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