Know Your Carrier and Know Your Business During Negotiations
Long gone are the days of relying solely on United Parcel Service (UPS) or the U.S. Postal Service (USPS) for all your small package ground delivery needs. Nowadays, most mailers are not only turning to a mixture of different carriers, but they’re also better able to negotiate carrier contracts than ever before. Rick Collins and Tim Geiken, both managing directors at transportation and shipping consultancy AFMS Inc., offered during a session at NCOF several negotiation pointers to catalog shippers when working out small parcel shipping contracts with carriers. Among these,
-Understand your business better than your carrier does.
-Look at your previous contracts and how well you did, specifically, last go-round.
-Keep in mind that carriers want revenue commitments to entice you not to use the competition.
-Don’t just demand low rates from a carrier during negotiations. Instead, provide them with a story line -- where your company has been, where it’s going, what your overall needs are, etc. This way, your rep will go to bat for you.
As Collins pointed out, UPS, FedEx and DHL “have essentially the same base ground rates,” while the U.S. Postal Service has its own pricing. “When you compare proposals,” he said, “you have to understand the differences in rates and what it means to the organization. The intricacies of looking at base rates is no small issue.”
One of the big differentiators among the carriers is their surcharges. “We’ve found that in reality, when you start digging into the details, especially with regard to catalog shippers,” Collins said, “increases aren’t, say, 3.9 percent, but anywhere from 5 percent to 9 percent. Carriers aren’t necessarily being deceptive about it, but you need to work these numbers into your negotiations.”
Above all else, he and Geiken cautioned, catalogers must be wary of common add-on charges when negotiating shipping contracts, such as address corrections, residential delivery, oversize charges for ground delivery, dimensional charges for air delivery, Saturday delivery and declared value (insurance).
What’s more, newer add-on charges will come into play. These include fuel surcharges on ground shipments, delivery area surcharges on air shipments, excess tracking fees, package return charges and security surcharges.
As of the beginning of this month, fuel surcharges were at an all-time high, they pointed out. For instance, UPS air is 12.5 percent, UPS ground is 3.5 percent, FedEx air is 12 percent, up from 11.5 percent last year, DHL air is 14 percent, which is actually down from 14.5 percent last year, and DHL ground is 3.5 percent. The USPS, of course, has no surcharges.
As for residential surcharges, FedEx air and ground are $2.10, FedEx Home Delivery is $1.75, DHL is $2.10, UPS Ground is $1.75, UPS air is $2.10 and UPS Hundredweight is $20, a new charge this year. DHL and FedEx calculate shippers’ discounts then add on the residential surcharge, while UPS adds the residential surcharge first, then calculates the discount.