These days, it’s all about data. Regardless of which industry you look to, the digital revolution has turned shipping into numbers, numbers into intelligence, and intelligence into a golden key with the potential to unlock increased profits. You just have to know where to look and how to parse the information you find. This last step—understanding the data that emanates from your supply chain—is crucial if you hope to get the best possible deal from your shipping carrier.
Shipment Data at the Negotiating Table
There is nothing more important than understanding your shipment data in depth when you sit down to negotiate a contract with your carrier. Only by knowing which areas to focus on during negotiations can you hope to walk out of the proceedings with the best deal possible.
Coming to the table with a broad assertion like “We ship a lot of ground” isn’t going to do it. What weights are you shipping? Which zones are you shipping to? How are minimums or price floors going to impact the deal because of your shipping profile? Having detailed answers to these questions and more can mean the difference between a standard contract and one that is 15% or even 20% cheaper.
The unfortunate reality is that FedEx and UPS contracts can be dozens of pages long. And knowing how to align your data with the myriad elements of these contracts is essential for effective negotiations. Another reality, however, is that most companies don’t have the time or the expertise to do this on their own. It takes a certain level of industry knowhow to make sense of an entire carrier contract independently, let alone decipher how your unique shipping data matches up to it.
There are, however, some basic data points to know even if you decide to partner with an industry expert on carrier contract analysis and negotiation. Having an understanding of your company’s unique shipping profile will go a long way toward bolstering your position at the negotiating table.
Understanding Your Shipping Profile
Your shipping profile is a comprehensive portrait of your shipment data including a range of characteristics. Characteristics comprise things like service mix or distribution, domestic or international, import or export, weight distributions, and zone or lane distribution (how far your packages travel).
It is based on these characteristics that FedEx or UPS determine whether your shipping profile is profitable or not. It should go without saying that the less profitable the profile, the less desirable the contract. Carriers are not likely to tolerate aggressive negotiations for profiles that aren’t very profitable.
Many companies only send packages that weigh a couple pounds, via ground, for home delivery. The major carriers don’t love these profiles because going to rural areas to deliver packages to homes is a lot more expensive than delivering to business areas, where the carriers are already picking up and dropping off packages. What FedEx and UPS want are heavy, ground, business-to-business packages on well-established and easily navigable routes.
Finding Opportunities for Negotiation
Regardless of the nature of your shipping profile, there are always areas to negotiate. You just have to know what to leverage. Weights alone are open to a variety of different discounts, especially with the prevalence of dimensional weight.
An extensive laundry list of surcharges and other miscellaneous fees—often added on after the package is shipped—are also critical to be aware of during negotiations. Most companies don’t have the slightest idea of the impact that these fees can have on their overall spend.
Finally, a variety of price floors—or minimum charges—are also in play when negotiating discounts. If you negotiate a great discount, but have a really high price floor, the impact of that discount will never be felt. Taking into account price floors, a 70% discount can turn out to be less than 40%. It just goes to show how important it is to know the details of both your data and your carrier’s contract before you begin negotiations.
When it comes to shipping, data is a game-changer. The more you understand about your company’s unique shipping profile, the better position you will be in when it comes time to negotiate a contract with a major carrier. Unfortunately, understanding how profitable your profile is for the major carriers—and therefore how much leverage you have in negotiations—is extremely difficult to do without the help of an industry expert. Finding the right partner to show you the ins and outs of your shipping profile before you sit down to negotiate a contract is the best way to ensure you’re getting the lowest rates possible on shipping.
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