Contract negotiation can seem like an uphill battle. Carriers have way more information than shippers do about how they set prices, what surcharges they’re willing to make deals on and what they charge your competitors. All of those things put shippers at a disadvantage when it’s time to explore a new agreement.
But that doesn’t mean shippers can’t have a successful negotiation. Developing a strategy by harnessing advanced data analytics technology, leveraging expert knowledge and practicing some patience, you can get a lot more from your carrier in your final agreement than you might have bargained for.
It’s contract negotiation season. Here’s how to prepare for contract negotiation in six steps before meeting with your carrier:
1. Use Technology
Analytical reporting is essential to stay competitive in an e-commerce world. If you’re not already gathering shipping data via an automated system, now is the time to start.
Shippers need to understand what they’re sending, where it goes, how long it takes and how well their carrier performs. This information can help you optimize your warehouses and internal processes as well as hold your carrier accountable for their performance based on your original contract terms.
For example, start by gathering this information manually from line-by-line review of invoices. Automation can help you gather significantly more data with significantly less effort.
2. Gather Business Intelligence
A successful negotiation requires you to see your contract terms through your carrier’s eyes. What are they least likely to give up? Where might they be more willing to make exceptions? The more you know about your carrier’s needs, the more you can tailor the goals of your negotiation plan so that they’re likely to approve.
That starts with simply following the news, to know what your carrier is investing in and what issues they’re facing. For more advanced intelligence like information about what they charge your competitors, you may need the assistance of an expert.
3. Know Your Data
Carriers already know how to maximize the profits they make from you–or at least they think they do. You can take them by surprise by knowing your company better than they do.
Once you’ve started gathering all that data from step one, you can begin to explore it. Data has a way of revealing inefficiencies, whether your costs are higher than they need to be on packaging, or you’re paying way more than you thought in accessorial fees. That information can show you what objectives to target in your contract negotiations to get the most bang for your buck.
What seems like a small ask–a reduction on a certain surcharge or a slightly modified price floor –may not look like much to your carrier. But it could mean significant savings for you.
4. Seek Expert Knowledge
Carriers negotiate contracts every day. Shippers negotiate once a year, if that. Naturally, carriers tend to be better at this process.
One way to bridge the knowledge gap is to seek professional help. Experts like the consultants at Reveel also do this every day, but they do it for people on your side of the negotiation. Our team can coach you as you prepare for negotiations, helping you analyze your data, decide what to target and develop strategies for when you’re sitting at the bargaining table.
Better yet, many of Reveel’s team members have been on the carrier side of negotiations, too. They can help you get inside your carrier’s head and anticipate their asks, which puts you another step ahead.
5. Consider Multiple Carriers
It can be good to have parcel carriers fighting over you. Even though ping-ponging back and forth between carriers can be bad for your brand, a little healthy competition can help you lock in market rates and occasional bargaining bonuses from your carriers.
Other carriers aren’t just there to help you in negotiations. If you’re constantly gathering business intelligence, you may spot a new service or deal from a different carrier that speaks precisely to your needs. It may make sense to do a little business with one carrier and the rest with another, even if it doesn’t get your carrier to offer you anything new in negotiations.
6. Invest The Time
Carriers like to drag out the bidding process. Often, clients will become impatient and settle for a contract that aren’t the best they can do. Typically, that’s because negotiating a contract is exhausting. Carrier contracts are typically 15 pages or more, and reviewing those documents in detail can be a huge drain on your team’s time.
Unfortunately, carriers do this day in and day out. Time isn’t a problem for them, whereas it is a challenge for most small shippers. Again, that’s where an expert can help.
Preparing for contract negotiation is an ongoing process. It requires implementing systems that can gather data and then figuring out what that data tells you. Supply chain leaders need to be plugged into industry news so they can make ahead-of-the-curve decisions. And they need to know their own needs better than anyone else does.
Even if you feel like the underdog in this match, you can be successful with contract negotiation. We know because we’ve seen dozens of our client companies do it. Contact Reveel today and let’s talk about how we can help you do it, too.
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