One of the most important pieces of small parcel shipping is effective contract negotiation with major parcel carriers to ensure lower shipping costs. The market for parcel shipping is more competitive than ever, so most companies are aware of how important having a strong parcel contract is. Shipping costs can tear businesses down, and with the rise of ecommerce shipping companies, it’s harder to compete than ever. Merchandise needs to get where it’s going, and it needs to do so in a timely, and cost-effective manner if the parcel shipping company wants to keep its doors or ecommerce site open.
While it’s generally understood how important parcel shipping contract negotiation is, a lot of companies are unaware of how to get a strong contract. Often shipping companies feel as though the parcel carrier has all the power in parcel shipping contract negotiations. Because parcel shipping companies view themselves only as a customer of parcel carriers like UPS, FedEx, USPS, and DHL, they might not know what rights they have in negotiating shipping costs. The companies that get the best shipping rates, however, are those that take a stand in negotiations and don’t just accept the shipping costs they’re told.
Negotiating cheap shipping rates for parcel shipping is becoming more complex as the market grows. It’s harder than ever to navigate discussions with carrier reps to get affordable shipping costs. Major parcel carriers like UPS, and FedEx, do have most the power in negotiations with parcel shipping executives. A large part of the problem is that parcel shipping companies often have misconceptions about entering negotiations. Here are three mistakes companies usually make regarding contract negotiation that prevent them from getting the cheap shipping costs they need:
We use the word contract to describe parcel negotiations on parcel shipping rates a lot, but in truth, it’s more of an agreement. There is usually nothing preventing re-negotiation of your shipping costs before it expires. Parcel shipping executives don’t realize that the they have this ability, but most contracts or agreements with carriers like FedEx and UPS have phrasing in them allowing both shipper and carrier to terminate it. It’s important for parcel shipping companies to realize this, because parcel shipping rates change quickly. One day your shipping rates might make your shipping costs very affordable, but the next day they could be above market average in the parcel shipping industry. It’s important to keep shipping rates current to optimize your shipping costs and logistics management spend. You can negotiate rates at any time, and since carriers like FedEx and UPS raise rates ever year, you should negotiate parcel shipping rates just as often.
Many parcel carriers don’t want shippers to utilize outside help to compare shipping costs. They might even tell you that you aren’t allowed to use third-parties to help you negotiate your rates. You aren’t the only one negotiating here. Parcel carriers are great negotiators, because they have to be. Reps often know more about a company’s parcel shipping than the company does. They have experts helping them every step of the way, but of course they wouldn’t want you to have the same. FedEx and UPS may not want to negotiate parcel shipping rates if you hire third-party help, so they may tell they’ll only offer published rates. They know you have very few options for parcel carriers still. If they stack everything against you in terms of shipping rate negotiation, how strong is your partnership?
Shipping data on your parcel shipping spend, carrier performance, and more is a very valuable tool for shipping rate negotiations. Of course, hiring outside parcel auditing services and transportation management system shipping software will help to gather data to help you leverage better shipping rates. Additionally, however, carriers will have data on your parcel shipping with them. They may tell you that you can’t use that shipping data to find the best shipping rates, but it is your data. Parcel shipping data is vital for optimizing shipping costs and finding ways to save. Using parcel auditing services is a great start. Especially finding third-party parcel auditing services that provide additional logistics management services, like assistance with negotiations, will help in negotiations greatly.
It’s essential to be prepared when entering negotiations with parcel carriers. The first step is gathering parcel shipping data, whether from parcel auditing, TMS shipping software, or from your parcel carriers. Carriers aren’t out to get you, but they’re a business just like you. Resources, information, and intelligence are the keys to getting the best shipping rates, and FedEx and UPS have no shortage of those. In the end, you know what’s best for your company better than anyone. Negotiate shipping rates to optimize your logistics management, and work with carriers who can offer you the business you need at shipping costs you can afford.