Most businesses have the goal of simultaneously increasing profits and reducing costs. To meet this goal in today’s competitive market, optimizing parcel spend is paramount, but many organizations lack the specific expertise and resources to do so. That is why you need to connect your business with a parcel contract negotiation services provider to understand more about your parcel spending and drill down on facts that can help you save money!
Rate increases, missed pickups, surcharges, and late deliveries all affect your bottom line. And with extra pressure to decrease costs, inadequate shipping contracts and pricing agreements can cause more unnecessary overspending. Whether you run a small, large, or medium-sized business, getting better at parcel contract negotiation enhances your ability to manage shipping costs and avoid rate increases.
In this blog, we will review best practices for shipping contract negotiations so that you can get lower shipping rates from your carrier service provider.
- The e-commerce shift
It is not a secret anymore that our entire world runs on the web. Online shopping platforms have quickly become preferred by customers, with Amazon as the frontrunner. This shift has strongly affected how shipping service providers do business. Every day more than 20 million Amazon orders are placed, with most needing to be delivered within 48 hours.
Even if your business is brick-and-mortar, understanding how online shopping and e-commerce trends have changed the game is crucial. More online shopping has led to more shipping. As a competitive industry emphasizing fast delivery times and sustainable packaging, all shipping is getting more costly, which in turn has made parcel contract optimization more important than ever before.
- Step by step: Break down the contract
Whether you are renegotiating an existing contract or negotiating a new one with another carrier, the first step is to review all relevant information, such as service levels, accessorial and surcharges, delivery times, schedules, and packaging options.
It’s always beneficial to ask yourself the following questions when negotiating a contract: Are there any special reductions or discounts related to base payment or surcharges? What kinds of services are included? Are there any guaranteed refunds or rebates if a service issue occurs?
- It is more than just the price
Pricing structure and shipping rates may be the most vital things to consider when negotiating your parcel contract, but it’s equally important to pay attention to other factors that may impact the price of your shipment. Service levels, DIM pricing, and minimum charges are some of the elements you need to optimize in your contract.
The effectiveness of your parcel carrier is also crucial to your contract negotiations. Maybe your preferred carrier is not completely reliable, even though the pricing fits your budget. Having an efficient and trustworthy carrier is undoubtedly worth adding a few extra dollars to your shipping budget.
Understanding and implementing this vast amount of information is a hefty task, no matter how prepared you are to optimize your small parcel contract negotiation. That’s why you need the best parcel contract negotiators by your side to scrutinize your parcel invoice data for hidden insights, refunds, and cost savings.
- When to start your parcel contract negotiations
Q4 is the ideal time to go through your shipping data and evaluate your organization’s needs before initiating contract negotiations. And if you don’t have the resources or the expertise to perform the negotiations, you can always seek assistance from a parcel contract negotiation services provider.
FedEx and UPS typically announce their general rate increases (GRI) sometime in September/October, providing you with the foundation for a January negotiation, so Q4 is an ideal time to perform an annual review and evaluate how the new pricing structure will impact your business. After this, you can make better decisions regarding your parcel contract optimization strategy.
Renegotiating your contract is vital if the current contract terms don’t meet your business requirements. However, it’s not good business to ask the carriers for a renegotiation every few months or wait longer than necessary to ask them for details.
The optimal times to ask for contract renegotiation from your carriers are:
- A few months prior to the end of the current agreement
- When notable changes are announced
- The start of a business year
- What can you negotiate within your small parcel contract?
Almost everything about your carrier agreement is negotiable when you know what to ask. This includes surcharges, accessorial fees, shipping classifications, and discounts.
You can analyze and audit your shipping invoice data to better understand your shipping pain points (like inaccurate accessorial charges and complex carrier incentives) and pinpoint areas where you may be leaving money on the table. These actionable insights keep your company’s profit interests top of mind while arming you for a beneficial contract negotiation.