When to Break Your Shipping Carrier Contract

Shipping Carrier Contract

No business relationship lasts forever. There may come a time when a shipper and a carrier have to part ways. But getting out of a carrier contract can be tricky if there are terms and conditions — and if it’s done prematurely, in pursuit of a better deal, it might affect the way other carriers perceive your brand in the future.

It is possible to get out of your carrier agreement without jeopardizing future deals and not pay an early termination fee. However, it starts with knowing your shipping profile and identifying where your carrier is hurting your bottom line. Many shippers consider using multiple carriers to strengthen their positions. Others request shipment contract negotiations, which can take place at any time.

Change is inevitable, which is why long-term service agreements have the potential to create problems for shippers. As their businesses evolve, shippers need the flexibility to ask for new services and ensure they’re getting good prices.

Carriers who are amenable to those conversations are valuable partners. If your contract carrier isn’t, it may be time to consider creating an exit strategy.

Is Your Carrier Helping Or Hurting Your Bottom Line?

The fundamental question for a shipper is: Is my shipping contract helping my company save money, or is it costing us too much?

The question might be simple, but answering it is not. This is where data comes in.

To understand how your carrier’s pricing really affects your business, you need to know exactly what you ship, where it goes and how much you spend in base rates and various accessorial surcharges per shipment.

Gathering that data means careful monitoring of every package you ship or careful review of each of your invoices. It can be a lot of work — but once you’ve gathered that information, understanding how rate changes will impact you is a simple series of math problems.

It’s also important to monitor news within your carrier’s company and talk with your team about how it might affect you. Technology updates that streamline services often save carriers money; are those savings being passed on to you? Are workers threatening to strike? If they do, do you have a backup plan and can you ask your carrier for certain damage or delivery refunds?

Information is power in contract negotiations. The more you know about your company shipments, the better you can zero in on what you need and the more carefully you can target what you want your next shipment contract to look like.

Using Multiple Carriers To Strengthen Your Position

Let’s say, after a careful review of your shipping profile and your carrier’s services, you’ve decided that your carrier doesn’t meet your needs. Exiting your contract may not be necessary. If a second carrier can fill in some of your primary carrier’s service gaps, you may be able to save money and save face in the industry.

A secondary carrier offers a variety of benefits. Regional carriers may offer increased pick-up options or faster transit times. The U.S. Postal Service may offer better rates for certain delivery and transportation services. Adding UPS or FedEx to your service mix (even if you already work with one of the two) can expand your distribution options or speed fulfillment of certain orders.

UPS and FedEx are constantly in competition with one another. Savvy shippers use this to their advantage in negotiations. If you currently work with UPS, but have done the math on FedEx’s rates and found that they’re the cheaper option, you don’t necessarily need to leave UPS. You can try to leverage those details to negotiate for a stronger contract with your existing carrier instead.

It’s important to note that, in negotiations, carriers are evaluating shippers too. A company that breaks a contract with its carrier for a better offer, then returns to that carrier when they undercut that offer, risks a reputation for flakiness. Leaving your carrier needs to be a carefully considered decision, not a negotiation tactic.

Creating An Exit Strategy For Early Termination

Carriers change their terms and conditions for different goods, transportation services, rates and surcharges multiple times every year. Depending on your shipment needs, some of those changes may barely impact your company. But others may send your shipping costs soaring. In that case, you need an exit strategy.

First, it’s wise to be aware of what competing carriers are doing, even if you’re not actively looking to leave your current provider. Evaluating carrier offerings is grueling — and if you have to do so suddenly, after your existing carrier’s charges spike, it will be much harder to prepare a cool, calm and collected evaluation of your options.

Actually leaving your contract carrier is complicated not only for your long-term contract, but for your business. Write out a timeline that would minimize disruption for your company and your customers. What needs to happen before you can begin using your new carrier? What do you need to complete with your outgoing carrier? Are there any hidden terms and conditions in your contract? Do you need to pay an early termination fee? And can you schedule shipments in such a way that you don’t miss a day of business?

Finally, review and update this strategy as your company changes. Your needs will evolve as your business grows. Your carrier’s services need to do the same.

If you need help determining whether your carrier is still right for you or if you’re considering early termination from your your long-term contract, contact Reveel. Our consultants can review your contract, help you analyze your invoices and point out inefficiencies and problems in your agreement — and help you figure out whether it’s time to move on.

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