Securing a competitive parcel contract with rates and discounts that are a good fit for your business can make a big difference to your overall shipping costs. Effectively negotiating a parcel contract requires careful research, analysis of carrier pricing structures and understanding your business’s shipping data.
This is why third-party negotiators have proven so valuable to businesses navigating parcel contract optimization. By leveraging industry expertise and technology, they help companies unlock significant savings in their shipping expenses.Keep reading the article below to learn more about Small Parcel Contract Negotiation.
Whether it’s the amount of time spent on shipping, the number of packages shipped, or the average package weight, your company’s unique shipping profile determines which carrier contracts are the best for you. Understanding your shipping profile allows you to better leverage contract negotiations, and secure better terms that will save your business money over time.
Many shippers are told that certain aspects of their carrier agreement are non-negotiable. However, that is not always the case. With that said, you should never enter into a carrier negotiation without understanding what you can negotiate and what terms might not be negotiable.
Some items that can be negotiated include rebates, tiers, peak/demand surcharge discounts, dimensional factor calculations, DIM pricing, bundling, refunds, and termination clauses. Businesses may also seek to negotiate specific terms based on their needs and priorities, including service level requirements, delivery guarantees, specialized services, and packaging requirements.
Carrier contracts are an essential element of a company’s bottom line, and can significantly impact shipping costs over the length of the contract. That’s why it’s important to negotiate for the most favorable rates and discounts possible. Negotiating a shipping contract requires a balance of confidence, knowledge, and diplomacy.
Securing the right carrier contract can help your company save money on shipping costs and improve efficiency. In the past, you might have had to settle for your carrier’s default rate, but today you can negotiate with confidence. Using advanced technology, AI-driven insights, optimization tools, and top-level industry and carrier expertise to your advantage during parcel contract negotiations is critical.
A skilled professional will be able to navigate the entire negotiation process seamlessly, providing you with peace of mind, cost savings, and stronger relationships with your carrier. The right partner will be able to identify the most lucrative opportunities, and craft an effective proposal that will benefit your company over time.
Know What’s in Your Current Carrier Agreement
Getting the best rates is a critical element to maintaining a cost-effective shipping operation. However, it’s equally important to ensure your operations are meeting customers’ quality standards. To accomplish this, you must be able to balance your shipping costs with service level requirements during the contract negotiation process.
This process requires a thorough understanding of your shipping profile, your current carrier agreement, and how your business is evolving. Investing in freight optimization tools, leveraging shipping data for analysis, and seeking expert assistance can help you navigate this process efficiently.
Your contract sets the terms for your company’s relationship with the carrier, including payment terms (such as cash on delivery or net 30/60/90), guaranteed service refunds, negotiated peak surcharge discounts, varying discount terms, accessorial fees, and incentive offers. Leveraging transportation management systems that offer shipping data analytics, e-commerce integrations, intelligent routing and multimodal options, and other innovative technologies can also help your team understand your existing rate structure and pinpoint additional savings opportunities.
Negotiating base rate caps is an effective strategy to limit price increases and reduce your overall freight costs. Additionally, negotiating residential delivery surcharge discounts can help reduce your overall shipping costs, which in turn can be passed on to your customers.
Other important factors to consider during your carrier contract negotiations are establishing guaranteed delivery windows and ensuring the ability to track shipments, as well as defining special handling requirements that support customer satisfaction. Maintaining positive carrier relationships and fostering open communication with your carriers can also lead to more favorable terms and better service performance over time.
Parcel contract negotiation is a complex and time-consuming process, but it’s essential to your shipping business. Taking these steps in the future will ensure you are optimizing your shipping costs and improving customer satisfaction, while navigating rate increases, service issues, and other challenges that can impact your bottom line. Contact us today to learn more about how our cutting-edge technology and industry expertise can empower your team to negotiate a better small parcel contract. The longer you wait, the more your competitors can capitalize on your inefficiencies.
Audit Your Invoices
Invoice errors and rate misapplication can cost your business a significant amount of money. Even after a successful negotiated agreement, these errors can continue to occur, making it hard for your business to keep its shipping costs under control.
To minimize these mistakes, it’s crucial to invest in a small parcel auditing process that can accurately verify the rates and services you’ve agreed to with your carrier. This way, you can ensure that the prices and discounts your team has negotiated are actually applied on each invoice.
In addition, a comprehensive freight audit can help you identify low-hanging fruit to target during your negotiation process. This may not be as big a win as a drastic reduction in your base shipping fee, but it can still make a significant impact on the overall quality of your services.
Aside from identifying low-hanging fruit, it’s also important to be clear with your carrier during the negotiation process about what you want and need. For example, if you’re a heavy Amazon user, you might want to focus on establishing transit time guarantees and detailed tracking options. This will ensure that you have a strong bargaining position during negotiations and will be able to secure the best possible contract terms for your business.
The most important thing to remember when negotiating a small parcel contract is that you’re not likely to get everything on your wish list. Be realistic about what you can achieve and go for the low-hanging fruit first. In the long run, this approach will save you more time and resources than trying to negotiate a complete overhaul of your contract.
Actively Manage Your Carrier Agreement
If you’ve got your eye on the future of your business and want to ensure that you continue to have access to competitive shipping rates, then it’s time to re-negotiate your carrier contract. The right negotiating strategies can save e-commerce businesses significant money, while maintaining service quality standards. By using a combination of internal data (like conducting a shipping invoice audit), as well as external data, like ShipSigma’s platform, you can gain the knowledge needed to leverage effective negotiating tactics during your next contract negotiation with a major parcel carrier.
The process of negotiating your small parcel contract can be a daunting one, but with the right strategy and guidance, you can position yourself for cost savings and a more competitive stance in the market. Whether you take on the project yourself or use the support of third party experts, successfully negotiating your contract can help ensure that you’re not paying for services that aren’t necessary to your e-commerce business model.
During your renegotiation, it’s important to focus on what matters to you and your customers. Defining your service level requirements during contract negotiations can allow you to secure base rate discounts, eliminate peak surcharges, and lower accessorial charges. In addition, you can negotiate payment terms and termination fees to meet your financial needs.
While the benefits of renegotiating your small parcel contract are clear, many shippers believe that once their agreement expires there’s nothing they can do to reduce shipping costs. However, most contracts are able to be renegotiated at any time and it’s always worth the effort when you consider how much you could potentially save!
Successfully negotiating your small parcel contract is essential for maintaining flexibility and agility in your supply chain. By tackling the process with a solid understanding of your shipping profile, the current state of your contract, and the ability to identify and analyze your invoices, you can ensure that you’re not being overcharged for unnecessary services. With the right negotiating tactics, you can position yourself for cost savings and continued success. To learn more about how ShipSigma can help you maximize your contract negotiation, reach out to us for a demo of our technology.