Carrier contract negotiations require a firm, professional approach. Be careful not to burn bridges, as a negative relationship with a carrier could come back to haunt you.

Shipping invoices, dimensional data and delivery reports create a body of information that levels the playing field during small parcel contract negotiations. With the right data, businesses can cinch a contract that fuels their growth. Keep reading the article below to learn more about Small Parcel Contract Negotiation.

Shipping is expensive, but that doesn’t mean you can’t reduce your costs. It is important to leverage your carrier relationships and negotiate proactively. A few key areas to focus on are the following:

Prior to kicking off any carrier negotiations, it is critical to be armed with data. A comprehensive analysis of your shipping spend, carrier contracts, and shipment history can provide you with the necessary information to negotiate rates. It is also helpful to understand current market trends, which can inform your position during the negotiation process.

The most effective way to bolster your parcel contract negotiation is by using shipping analytics software that integrates with your business systems. This allows you to keep a central record of your shipping volumes, establishing your shipping volume credibility during negotiations. It can also help you identify opportunities to streamline your shipping processes, such as automating label generation, which can lower your operational costs and eliminate costly mistakes like misdirected shipments.

Another area to focus on during your negotiation is accessorial charges, which can quickly add up on your invoice. These are additional fees and surcharges that can be applied to your shipment, including fuel surcharges, same-day delivery fees, and residential vs. commercial delivery surcharges. These charges are typically not included in your shipping agreement, but are negotiable and can result in significant savings.

Lastly, don’t forget to negotiate your rate tiers and earned discount incentives. These can significantly reduce your shipping costs, especially if you ship a high volume and are willing to work with the carriers to earn these discounts.

While negotiating your parcel contract may seem daunting, it is important to remain calm and be prepared for counterarguments from the carriers. With the right preparation and a seasoned consultant on your side, you can achieve a great outcome that saves money without damaging your carrier relationship.

Negotiating Earned Discount Tiers

Carrier contracts determine specific rates, surcharges, and conditions for small parcel shipping. While shipping cost reduction strategies like optimizing packaging, leveraging automation, and implementing data analytics are essential for reducing costs, contract negotiations are a critical element of effective parcel spend management. Learn shipping-cost-reduction strategies proven and used by professional parcel negotiators, and you’ll be well on your way to a best-in-class carrier agreement.

Most shippers’ main focus during contract negotiation is negotiating earned discount tiers. These tiers determine the specific commodity a package belongs to, which influences how much you pay for the service. For example, a dense product like iron rods might be classified as tier 1 in the Hundredweight Service rate structure, while a less-dense item such as a mattress might be tier 7.

The higher you climb in a tier, the more discounts you earn on your shipments. In the past, discounts were based on weight, zone, and even level of service, but carriers realized that rewarding large volume with low-level incentive programs did not always favor their bottom line. As a result, they moved toward revenue-based incentive models for their top shippers.

One of these revenue-based incentive programs is the Minimum Package Charge (MPC). Depending on your service level and contract terms, MPCs can add up to significant amounts in your final invoice.

Many shippers do not realize that MPCs are negotiable, and a little knowledge can go a long way to minimizing your parcel costs.

Aside from maximizing your earning opportunities, shipping data analysis and automated parcel auditing will help you stay on top of any refunds that might be available to you. These insights keep your company’s interests top of mind during the negotiation process and ensure you don’t leave any money on the table. As a result, effective parcel contract negotiations help you reduce your annual transportation spending by an average of 13%. This savings is more than you could achieve by negotiating a single rate increase or eliminating just a few unnecessary surcharges.

Negotiating Residential Delivery Surcharge Discounts

Depending on your business model, a residential delivery surcharge discount can significantly reduce your parcel shipping costs and enable you to pass these savings onto your customers. However, securing this type of discount requires a comprehensive approach to your carrier contract negotiations. In this episode of Parcel Perspectives, Glenn Gooding dives deep into the mechanics and strategies surrounding this vital aspect of small parcel logistics.

With annual general rate increases (GRI) scheduled to occur in January, now is the perfect time for e-commerce businesses to optimize their carrier contracts. Securing cost-effective contracts will help offset future rate increases, minimize unnecessary overspending and enable businesses to meet their customer service requirements in an efficient manner.

In order to negotiate optimally, companies need a clear understanding of their shipping data, the ability to compare carrier proposals thoroughly and the support of third-party experts. Third-party logistics experts can save time and resources by running data reports, shopping around to multiple carriers, negotiating with carriers on behalf of businesses and delivering ongoing contract monitoring to ensure that businesses are always maximizing savings opportunities.

It’s also important to consider additional terms and conditions in your parcel contracts, such as negotiated tiers, volume-based pricing penalties and accessorial fees. These can be challenging to understand, but leveraging shipping data analysis and a carrier management solution like Sifted Logistics Intelligence can help to clarify these complexities. SSI will provide you with the clarity and transparency that you need to confidently approach your carrier agreement negotiations.

Achieving optimal carrier agreements requires a holistic, data-driven approach that combines the right tools with a knowledgeable consultant who can balance the complexities of your parcel contracts and provide you with a realistic assessment of your current rates and opportunities to negotiate. A quality e-commerce logistics consultant can empower your team with the knowledge that they need to succeed and deliver a best-in-class parcel contract that will ensure long-term success.

Negotiating Termination Fees

Depending on the language in your carrier agreement, your business could be vulnerable to termination fees. These fees, which can range from a percentage of your total annual spend to a flat fee per day that you remain on the contract, are intended to deter you from switching carriers or renegotiating rates before the end of the term. Some agreements also include early termination clauses with substantial penalties. If you have these in place, it’s imperative to negotiate before the terms are triggered.

Carrier agreement negotiations are complex, involving many details and terms that can be difficult to understand. While the complexities of these agreements work to the carrier’s advantage, experienced consultants can offer insight and clarity during these discussions, helping you achieve your goals.

Effective consulting also requires strong relationships, which is why it’s critical to approach a negotiation with professionalism and persistence. A consultant can help you develop rapport and build trust throughout the process, laying the foundation for an ongoing partnership. Additionally, leveraging technology to simplify and streamline your parcel data can level the playing field with your carrier, making it easier to navigate the complexities of an agreement.

The best way to prepare for a successful small parcel contract negotiation is to analyze your shipping profile and understand the major cost spends that are impacted. To do this, you need a clear understanding of your current shipping conditions, including volume trends, service mode, zones, package weight/dimensions, commercial vs. residential exposure, and accessorial exposure. This information can then be used during a negotiation to ensure that you’re receiving the best possible deal for your company.

Paulette Hughes