Reveel Resources

How Greater Transparency Helps You Reduce Shipping Costs

Transparency Helps Reduce Shipping Costs

Shipping companies’ pricing structures are intentionally non-transparent. While FedEx, UPS, and other parcel carriers post rate guides on their websites, the array of surcharges and other fees make it difficult to estimate exactly what your shipping rate would be.

Large companies negotiate business-to-business contracts that can vary widely from one company to another — so much so that many businesses have no idea what their competitors are paying or what fair shipping rates would even be.

Greater transparency in the shipping industry allows businesses to negotiate for the best possible rates, based on what their competitors are paying.

Carriers don’t offer this information. But industry insiders like the team at Reveel know from experience how carriers make pricing decisions and what their rates are. This expert knowledge can give businesses the edge in negotiations and help them reduce shipping costs.

First, understanding how carriers set their rates can give you the upper hand in negotiations with your current carrier.

Second, by working with industry experts, it is possible to use industry and regional benchmarks to estimate your competitors’ spending and take that information to the negotiating table — cutting your rates by as much as 20 percent.

Understanding Carrier Contracts

Carriers customize contracts for most of their business clients. For smaller clients — those spending under $100,000 per year, generally — rates are based on proprietary formulas, which consider shipment data such as the amount of parcels a business ships, the average package weight, how often they ship, and how far products travel.

Related: Decoding Your Shipment Data: Surprising Information Your Analytics Reveal (How Data Helps You In Contract Negotiations)

There’s less room for negotiation with smaller contracts like these, but by understanding differences among carriers, businesses can make a case for lower rates, eliminate surcharges, or make the switch to a competitor.

Larger contracts are based on the same general criteria, but have more flexibility based on carriers’ needs. For example, if a company’s distribution hub is particularly convenient for a carrier, the company may be able to push for discounts based on their volume of shipments, such as a lower base shipping rate or other cost savings.

Armed with information about what carriers want in their contracts — and supported by inside industry knowledge like Reveel’s team offers its clients — businesses can compare carriers to one another and target those who might offer the best rates.

They can also push carriers for better deals that can work to carriers’ advantage, too.

How to Compare Carriers, Even When They Don’t Want You To

Shipping companies closely guard information about their rates and fees. Though small companies’ shipping rates are likely determined by an algorithm, contracts can vary widely from one company to another.

As such, it can be difficult to estimate what your competitors pay for shipping — whether they use the same carrier your company does or send their shipments with another provider.

At Reveel, we strive to lift the veil on shipping rates. Our team of former FedEx, UPS, and DHL shipping company executives know exactly what benchmarks companies use to set rates. They also understand how these rates vary by industry and region.

This expertise is the foundation for practical advice that can level the playing field between you and your competitors — and reduce shipping costs.

Carriers benefit from the shipping industry’s current lack of transparency. They can offer businesses small perks — waived fuel surcharges or bulk rates, for example — instead of truly lowering rates, and businesses may accept those perks instead of shopping around for better deals.

Understanding how carriers design contracts is the foundation of your negotiation. Comparing carriers is key to negotiating the best possible rates, either with businesses’ current carriers or new ones. The shipping industry doesn’t want businesses to have this information — because when they do, they can negotiate the most favorable contracts — maybe even with a competitor.