How Does Parcel Contract Negotiation Work?
There are a lot of factors to consider when choosing a parcel carrier: service, punctuality, quality, etc. All these things are important, and they all influence the relationship between shippers and their carriers. But, if you asked decision makers what the most important factor is when it comes to selecting a parcel carrier, the majority would tell you: The Price. Ultimately, businesses have the responsibility of looking out for their bottom line, for the sake of both their customers and their employees. Companies can’t help people if they go under.
And while transportation costs are viewed as vitally important, many leaders in the logistics space don’t have a firm grasp of where those costs come from. Transportation costs are largely derived from carrier contracts, the agreements shippers sign with their carriers establishing their shipping rates. What many leaders miss though, is that these rates are negotiable.
It’s true that carriers do have published rates they use as a baseline, but individual carrier contracts can, and do, vary wildly. Parcel contract negotiation works by understanding this fact, that the carriers want your business, and will often meet you halfway if you ask. Understanding how to ask, and what to ask for though, can be tricky.
Why Parcel Contract Negotiation Matters
The reason why parcel contract negotiation matters so much is that the carriers are not looking out for your bottom line. They have their own P&L’s to worry about, and minimizing your costs often comes at their expense. It is up to you and your team to get the most from your carrier contracts, and make sure profits aren’t leaking out.
Tips for Successful Parcel Contract Negotiation
Now that you know you can, and should, negotiate your parcel contracts, here are four tips to keep in mind as you start the process:
Bring Your Own Data:
Understanding what you ship, how it ships, and to where, is critical to a parcel contract negotiation. Again, the carriers are not inclined to point out areas where you could be saving more, and if you don’t understand your own service levels, weights/dimensions, or zones, you won’t know what to ask for.
Know Your Options:
Working with a single carrier is sometimes simpler, but it’s hardly ever the cheapest option. Expanding your carrier portfolio through an advanced TMS, or at a minimum bringing other national and regional carriers into the negotiation as leverage, can make a massive difference to the contract you eventually sign.
Read the Contract:
This one seems simple, but carrier contracts are designed to be purposefully esoteric. The hope is that this will give the carriers an advantage, and the shippers will ultimately sign up for higher rates. Knowing what to look for in the contracts, such as term lengths for discounts and pricing tiers, is vital to securing savings down the line.
If the past few years have taught us anything, it’s that things change. Shipping profiles change, carrier’s rates can and do change, the entire supply chain industry can change seemingly overnight. You always have the right to re-visit your own rates, and the obligation to look out for your customers.
At Zero Down, parcel contract negotiation is what we do best. If you want someone on your team who will intelligently look out for your bottom line, and effectively stand up for your business, reach out to us for a Free Demo.
You Can Be Better. We Can Help.