Every year the major parcel carriers announce a general rate increase (GRI), which historically averages out to around five percent. Additionally, these carriers implement logic changes to their rate calculations, meaning some packages see higher rate increases, while some see lower increases. Yes, a smaller percentage increase seems like a win for the shipper, especially when compared to some of the larger, double-digit percentage increases, but it still means you’ll be paying more.
We recommend you do a yearly review of your parcel carrier contracts, especially after the GRI announcements are made in the fall. You don’t want your shipping spend to go up, so doing whatever you can to mitigate these increases is imperative.
Without further ado, here are our top 3 tips for negotiating your parcel contracts:
- Know what you ship. When you step into the ring to begin negotiations, it’s vital to have key data that accurately represents your shipping profile. What’s the breakdown of ground shipments versus air? What are your averages, weight of packages, dimensions, average zone used? All of this information will give you negotiating power so you can prove that moving your packages for less will still be profitable for the carrier.
- Know the most impactful areas of your shipping profile. Again, data is king here. Knowing how your current contract, if you have one, addresses commonly increased logic changes will help give you a target of the most impactful areas to focus on during negotiations. How many heavyweight packages are you shipping versus lightweight? What’s your minimum charge per package? What other transportation surcharges and additional handling surcharges do you commonly have to pay? Without these figures, you’ll have no direction to form a negotiation strategy and will be at the mercy of the carrier.
- Know contract language. Does your specific contract wording have volume commitment levels that could negate savings potential? Do surcharges end before the terms of the contract? Do you benefit from guaranteed service waivers? It’s important to understand what you’re signing and ensure that all of the language and terms are beneficial to your shipping profile.
Contract negotiations can be a daunting and difficult task. AFS specializes in advising our clients on the best way to conduct an effective negotiation; what language to use, common contract “traps”, and assistance in compiling your relevant data. While you may think you’re at the mercy of the carriers, they want to earn your business too and are willing to negotiate special rates to do so. Let AFS help you through the process, call us at 877-242-3383 or email [email protected].