Parcel shipping has become an integral part of modern business operations, especially with the surge in eCommerce and the global shift toward online shopping. Companies are shipping more goods directly to consumers than ever before, making efficient and cost-effective parcel shipping a crucial factor for maintaining profitability.
With customer expectations rising, fast and affordable delivery has become a competitive advantage. Businesses now face the challenge of managing shipping costs while ensuring timely deliveries, making parcel shipping carrier contract negotiations one of the most important success factors.
But budgets are tight, so is it possible to negotiate better shipping rates, terms, and conditions in carrier contracts without bringing expensive consultants on board? In our latest whitepaper, Do-It-Yourself Parcel Carrier Contract Negotiations, we dive into our tried and true five-step negotiation process for carrier contracts that organizations can implement and execute on their own terms. We’ll review the highlights in this article, but you can download the full whitepaper here.
Uncovering The Complexity of Carrier Contracts and Agreements
Carrier contracts are agreements between the shipping company and the carrier that outline pricing, service levels, and specific terms related to shipping zones, package weight, and volume. Every detail in a carrier agreement matters because small changes can have a significant financial impact, making it quite a complex document.
For example, a company may sign a contract with a major carrier, like UPS or FedEx, that includes base rates for shipping to various zones across the country. However, surcharges are often layered on top of these base rates. If a company absorbs a new surcharge for shipping to a certain zone, such as rural delivery fees or peak season surcharges, it could see its shipping costs rise unexpectedly. Similarly, seemingly minor details like dimensional weight pricing can lead to unexpected costs, so careful analysis is essential before signing any agreement.
Why Organizations Are Interested in a DIY Approach to Negotiating Parcel Carrier Contracts
Traditionally, businesses have relied on specialized consultancies to help analyze and negotiate parcel carrier contracts. These third-party experts are skilled at reviewing carrier agreements, identifying hidden fees, and negotiating better rates. However, many organizations have become fatigued paying high consulting fees and are opting for a DIY approach, handling contract negotiations themselves.
Why the shift? The main driver is control and costs. Many businesses desire more transparency and direct involvement in the contract negotiation process to gain a better understanding of where their money is going. Another factor is the availability of data analytics and negotiation support tools, enabling businesses to identify areas to focus their discussions with their carrier during a negotiation, without external help. Cutting out the middleman can save money, as consultancies often charge a significant percentage of the savings they help businesses secure.
Five DIY Steps To Master Carrier Contract Negotiations
Negotiating parcel carrier contracts is no easy feat. One of the biggest challenges is the complexity of the agreements themselves. Carrier contracts are filled with fine print, complicated pricing structures, and fluctuating surcharges, which can be overwhelming for businesses unfamiliar with the intricacies of the shipping industry. For organizations looking for a DIY solution, we’ve created a 5 step process to guide you through negotiations. You can get an in-depth analysis in our whitepaper, but we’ll go over the basics below.
Step 1: Understand the Basics of Carrier Agreements
Parcel carrier contracts are complicated, but there are a few items that apply to all carrier contracts:
- Published shipping rates from annual GRI reports are a good starting point, but you should always prepare for additional costs.
- The fine print will include a variety of surcharges and additional costs.
- Carrier contracts often include terms with different expiration dates, so your negotiated terms may expire before your contract does.
- There’s always room for negotiation.
Step 2: Consider the Levers to Secure Savings
There are many different components and intricacies that can be negotiated within your carrier contract. Some of the most important factors include:
- Service level discounts
- Delivery area surcharges (DAS)
- Shipping zones
- Weight breaks for heavier packages
- Minimums
Download our whitepaper for the 4 other factors that impact your negotiation leverage and service levels.
Step 3: Prepare to Negotiate
Once you’ve completed steps 1 and 2, you’re ready for negotiation preparation. The keyword here is preparation. You don’t want to go into these conversations with your sales representative without doing your own due diligence. Here are a few best practices to keep in mind.
- Understand your organization’s unique shipping profile and pinpoint your Shipping Vital Factors before going into any negotiation. Shipping Vital Factors will include total shipping spend, total surcharge spend, minimum charges, and more.
- Focus on discounts and terms that really impact your bottom line. Prior to these conversations, determine the most significant opportunity in your contract to lower shipping costs.
- Don’t underestimate the power of competitors. If you find that other competitors have more favorable contract terms and conditions, present it to your preferred carrier.
Steps 4 & 5: Adjust Your Mindset and Focus on Relationship Building
In the best negotiations, everybody wins. With a ‘win-win’ mindset, building a long-term partnership with your carrier will lead to optimal rates and service for years to come. To learn more about timing negotiations and how to build a partnership with your carrier, download the whitepaper here.
Dominate Parcel Carrier Contract Negotiations
By implementing these five steps for DIY carrier negotiations, your organization is on the right path to lowering shipping costs and building a strong partnership with your carrier of choice. Get ready for your next contract negotiation and download our latest whitepaper.
Ready to take it a step further? Request a demo with our team to learn about how Reveel’s Parcel Spend Management 2.0 technology can best prepare you for your next carrier contract negotiation.
