Mistakes to Avoid When Negotiating Your Next Shipping Carrier Contract
A single word within a carrier agreement can result in significant rate hikes. For example, UPS recently created a new set of list rates called “Standard” rates. However, these new “Standard” rates are anything but standard. The new tariff is as much as 35 percent higher for air services than the carrier's “Daily” rates!
* Going it alone. Nine out of 10 shippers are overpaying for UPS and FedEx services by a minimum of 10 percent. If you feel you’ve gotten as far as you can with your carriers, perhaps it’s time to seek outside help. Volume shippers obtain significantly better discounts through consultants — up to 50 percent lower.
Most third-party market experts are willing to conduct a no obligation, complimentary assessment of your current rates and terms to assess potential savings. Several firms will also benchmark and score each component of your pricing agreement.
* Don’t make time for carrier meetings. The relationship you forge with your carrier isn’t made during contract negotiations, but rather throughout the year. Carrier reps often lament that some of their customers don't make time for them to demonstrate additional value. Many shippers only contact their rep when there’s a billing issue or to address the occasional late or lost shipment.
Shippers can derive tremendous value in scheduling routine meetings with their carrier reps. Carrier reps work with many other companies and can help you better manage your spend through best practices; leveraging value-added services and technologies; and integrating additional product offerings like less-than-truckload shipping, mail, ocean, warehousing and other carrier services.
What You Should Do
Review management and service performance reports. Determine ways to reduce address correction and other often preventable fees. Review electronic invoicing options best suited for accounts payable needs. Challenge your carriers with ongoing rate improvement initiatives and zone skipping opportunities, and amend your pricing agreement as needed. Meet frequently with you carrier reps, both the incumbent (at least quarterly) as well as nonincumbent (at least annually).
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies. Rob has helped some of the world’s most recognizable brands reduce parcel shipping costs an average of 25 percent through contract negotiations, rate benchmarking, modal optimization, invoice audit and other savings vehicles. A cum laude graduate of UCLA, Rob has 20 years of transportation industry experience, including executive positions at DHL and Stamps.com, in addition to his work as an outside consultant since 2001.