One of Reveel’s primary goals is to help our clients negotiate better shipping contract terms. And one of the questions we get most frequently is, “How often should I negotiate carrier delivery contracts?”
The short answer is that it depends on your company’s needs. Here’s the long answer.
As Companies and Carriers Change, Current Contracts Need to Change
Contracts are written to satisfy the needs of both companies involved as well as possible. But as businesses grow, their shipping needs change. And as shippers compete for market share, their costs structures evolve too.
First, many of Reveel’s clients renegotiate their contracts because they’ve noticed changes in their shipping profiles. In some cases, retailers have debuted new products or started serving a broader geographic area. In other cases, manufacturers have lost significant accounts when assembly plants go out of business. We estimate that most small businesses see significant changes in their customer makeup or product lines every two to three years.
Second, small companies frequently undergo mergers, acquisitions and spinoffs. If your company merges with another that has a current contract with a carrier, you should negotiate a joint contract. It’ll increase efficiency for both you and your carrier.
On the other hand, carriers sometimes try to take advantage of spun-off companies, since they have accounts much smaller than their parent companies did. Reveel helped Nixon avoid that. When Southern California surf accessory brand Nixon divested from its parent company Billabong, UPS told them they couldn’t match the deal they’d given Billabong. Reveel helped Nixon restructure their contract altogether — and in the end, they paid 19 percent less than they’d paid as part of their parent.
Finally, carrier offers evolve. FedEx and UPS increase rates every year, and tend to follow one another’s moves — though they do have some key disparities that could make a big difference for your business if you take advantage of them quickly.
At the same time, the U.S. Postal Service has expanded its service offerings and shown steady improvement in its customer satisfaction ratings. More than 80 percent of U.S. companies now use USPS for at least some of their business, according to a 2017 Parcel survey.
You Can Renegotiate Whenever You Want
UPS and FedEx typically release their rate sheets for the upcoming year in the fall, sparking many companies to renegotiate contracts before the new rates kick in. But you can ask for a renegotiation with your carrier at any time.
It’s best to initiate negotiations when you’re prepared. That means developing a robust understanding of your shipping profile — what you ship, what your parcels weigh, how far they travel, how frequently you pay each type of surcharge, and more. Then, it means experimenting with contractual changes to see how each would change your shipping spend.
At the same time, you can have conversations with competing carriers.
Understanding how a new carrier’s rate sheet would apply to your shipping profile takes time and expert knowledge, and few companies have the resources to shop around. But FedEx and UPS are continually in competition for contracts. If one sees the opportunity to woo you away from the other — or the other sees their competitor luring you — they may be willing to offer even better terms.
We recommend renegotiating at least once every two years. Typically, in 24 months, both your needs and your carrier’s prices have evolved. Working on approximate two-year cycles helps you examine your shipping data strategically and keeps your carrier on its toes.
How Reveel Can Help You Start Contract Negotiations
Unsure about when to renegotiate your contract, what to ask for, or how to better understand your shipping data?
Reveel can help with all three of those tasks. Our firm was founded by former DHL pricing executives, and our consultants come from the shipping industry, so they’ve been on the other side of these negotiations and know how to think like carriers.
Reveel signs three-year agreements with our clients. We’ll help you prepare for negotiations at any time during that period, as many times as you want. The best part? We earn only a percentage of whatever you save — no base agreement fees, no hourly charges. We don’t get paid if you don’t save.
We approach our clients as partners. We’ll help you understand your shipping data and prepare for your negotiations. We’ll advocate for strategies that maximize your savings throughout. That’s not just a motto — it’s our business model.