Preparation plays a key role in how well a company can negotiate the shipping rates contained within its small parcel rate agreements. Everyone knows there is a wide range of discounts small parcel carriers are willing to offer their customers, but the secret to securing the lowest shipping rates lies within the details of knowing what information is both available and relevant to the negotiation.
Here are six ideas to help you negotiate the best possible discounts for your next small package agreement:
1. Get your data together
The more specific information and data you can provide about your shipping history the better. When you generalize key details like shipping patterns, volumes, or accessorials, it forces the carriers to do the same with their pricing. And when carriers paint with broad brush strokes, it often results in an agreement with blurry lines surrounding service-level discounts. While the gross discounts may look good on paper, the agreements usually contain a vast gray area of fine print and minimum charges that diminish the net financial impact to your bottom line.
2. Present it professionally
A well-prepared RFP shows you are serious about negotiating better shipping rates and shows the carriers you know how to thoroughly evaluate their pricing proposals. A lot of engineering manpower resides behind the shipping rates within small parcel rate agreement, and that can make it difficult for even seasoned supply chain professionals to compare rates the agreement’s value to the shipper. Since you are outmanned, it’s important to present a cohesive request to the carriers so they know that you are prepared and that you mean business.
3. Let carriers compete for your business
It’s no secret that FedEx and UPS are great companies from a service standpoint, so it can be a mistake to assume you cannot use both for all types of service levels. Even if your organization has no intention of shifting some or all its volume to the non-incumbent carrier, it’s important to keep that close to the vest. Each carrier’s value proposition is tried and true. While each carrier can support claims to be stronger than the other in various areas, the big picture is one of relative parity – and for a service that widely boils down to only two options, it would be unwise to show your hand and forego what little leverage you have to reduce your shipping rates.
4. Think about the future
It goes without saying that you need to thoroughly understand your company’s current shipping trends and behaviors. While these characteristics are important, it’s also vital to have a firm grip on where you see the business in the mid to long term. If you expect business to improve, you obviously will want to benefit from that through further discounted shipping rates down the road. If you expect it to decline, then you need to be honest with yourself and with your carrier. Otherwise, you will get the carpet pulled out from under your tier-based discounts as your volume declines.
5. Find a partner
Even though you may have the first four points well under control, negotiations of any kind tend to be somewhat shrewd. If there ever were an exercise for which experience mattered, without a doubt, it’s the negotiation of better shipping discounts. While 80 percent (or more) of the process is relatively straightforward, it’s the remaining portion that can make or break the ultimate value of the new rate agreement. Keep an open mind while performing due diligence during the preparation process. Third-party negotiators aren’t for everyone, nor are they all the same. Costs and experience vary widely, but if you find the right partner, you will end up with right carrier agreement for your organization.
6. Maintain your diligence
The work is not done once the contract is signed. If you are not already, look into working with a parcel audit company to make sure the carrier is living up to their end of the contract. Most third-party providers offer an audit solution but keep in mind that you should not be required to pay for both solutions. A good third-party negotiator will continue to validate its performance throughout the term of the small parcel carrier agreement. An audit is a valuable add-on but is meant to provide the customer with added business intelligence and cost recovery due to carrier errors, not to catch things that were missed during the negotiation.
Your approach is everything when it comes to small parcel rate negotiation. Taking the time to prepare properly will help make sure you get the rates possible for your business.
Transportation Impact is the industry leader in small package negotiation. Our team is comprised of former executive-level carrier pricing personnel and has more than 300 years of combined pricing experience. While other companies rely solely on data to determine what a company’s shipping rates should be, our pricing experts go a step farther. After Transportation Impact conducts a thorough analysis of a company’s carrier invoice data, our pricing team reviews and adjusts the results based on proven pricing experience. That’s why we are the only company in the industry that will guarantee its savings projections, in writing, to the tenth of one percent.
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