FedEx and UPS’s 2018 rates are taking effect now, which means many companies are overdue to negotiate — or renegotiate — contracts with their carriers. Negotiating can be intimidating, since carriers intentionally limit the amount of information companies have about the agreements they strike with others. The more company leaders know, the more money they can save.
Parcel carriers capitalize on five basic negotiation mistakes. Here’s how to avoid them.
Not Knowing Your Shipping Profile
Ultimately, what carriers want in a shipping contract is profit. Most shippers have relatively straightforward formulas to determine if a company will benefit or cost them, based on the size of their shipping spend, zone distribution, and customer mix. They plug in a potential client’s data and see whether they could be partners.
You can outsmart your carrier by knowing your data better than they do. Prepare by starting to track every shipment or auditing past invoices to understand exactly how much you ship and its transportation.
Then, compare that data to your existing contract and experiment to see what might save you money. Surcharges and minimum fees, for instance, often cost companies more than they realize and are good candidates for customer negotiation. In other words, it is important to understand the negotiation process.
Failing to Compare Competing Carrier Offers
Sticking with the same carrier for years or decades often makes sense — a long business relationship can be a trustworthy, fruitful one. The similarities between major carriers’ rate structures may make comparison shopping seem futile. But if you’re not occasionally checking in with your carrier’s competitor, you could be missing out on better terms.
Shipping is generally a zero-sum game — if FedEx gets a contract, UPS does not. Carriers are willing to offer deals if it means wooing a big client away from a competitor, such as the postal service. And even if you’re satisfied with your carrier’s service, negotiating with a competing proposal in hand strengthens your position. Your carrier may be willing to waive some fees if a competitor is.
Thinking Like a Shipper, Not a Carrier
Once you’ve reviewed your data and considered other carrier deals, it’s time to put yourself in your carrier’s shoes: What do you offer to them? Why do they need your business?
While some aspects of your contract may be undoubtedly attractive — if you’re a large company or have an extremely loyal following, for example — others, such as a remote location or new brand, may seem like challenges.
Find out how those challenges could benefit your carrier instead. Does your remote location lie near a residential delivery route that would be a money-loser otherwise, or can you show that your business is poised to grow dramatically? Anticipate those doubts and have the answers ready.
Waiting too Long to Negotiate
A carrier agreement can take up to two months to finalize. New rates take effect in December and January, and the last few years show a very steady trend of annual rate and surcharge increases.
If you missed the chance to negotiate in 2017 in advance of this year’s new rates, get well ahead of your 2018 negotiation. Start reviewing your shipping data and your existing contract so you’ll know exactly what to target when negotiating.
Preparing to Negotiate Without Expert Help
Preparing for negotiation takes a lot of work. Auditing invoices, for example, is labor-intensive and often disorganized. Tracking shipping in real time often requires software and services training that companies lack. But deciding not to do this due diligence could mean you’re spending more than you should.
Reveel exists to fill that gap. Our consulting team is made up of former pricing staffers and executives at major U.S. carriers, so they understand what companies are up against in negotiations. We analyze companies’ shipping data to understand their supply chain needs and make tailored recommendations to improve their contract terms. (We also make it easy to audit each invoice quickly — which often saves our clients money right away.)
We help negotiators arm themselves with knowledge their carriers don’t expect them to have. And when our clients get the upper hand, they can save as much as 15% on shipping. Let’s start talking about your next negotiation.