Carrier Contract Negotiation

June 19, 2019 ShipSigma

carrier contract negotiation

What is carrier contract negotiation?

As a business owner you should never feel like you’re stuck with the contract that you’re handed. It doesn’t matter which carrier you decide to contract with, big or small, you have every right to negotiate rates and other terms of your shipping contracts. 

There is no one-size-fits-all contract and your business should have a shipping deal that suits it. With the right partner negotiating on your behalf you’ll be able to reduce your shipping rates by a substantial amount every year.

When you sign up with a shipping carrier your agreement will outline and define all of the terms for the services that they will provide. The goal of carrier contract negotiation is to get the lowest possible rates before signing in order to guarantee optimum savings. Paying close attention to late deliveries, invalid charges, lost packages and other issues will also help you get the best rates possible. Arming yourself with shipping data is the best way to negotiate your shipping terms.

When you start negotiations with a new carrier you can bet that they have a large amount of data to back up their negotiations. Coming in blind is the worst thing you can do. It’s possible to collect data on your own, however, if you want the best possible outcome for your shipping contract the smartest and easiest choice is to partner with a parcel auditing company to negotiate on your behalf. Using your shipping data ShipSigma can maximize your shipping savings by negotiating the best rates possible with the carrier of your choosing.

If you’re on the fence about hiring a parcel auditing company consider these things:

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  • Time = Money - We all know that time is valuable. However, many business owners make the mistake of cutting costs on certain services by doing things themselves. This makes sense if data collection and contract negotiation is your thing but let’s assume that it’s not. You wouldn’t put your finance guy in charge of your social media would you? Didn’t think so. Instead of spending countless hours learning what information you need, how to find it and then how to present it, be the delegating business person that you are and let the pros handle it. You’re time is better spent elsewhere.
  • You Should Negotiate everything - Every negotiation made no matter how small can lead to large savings, so negotiating whenever possible is crucial. In order to do this properly you’ll need every bit of data available at your disposal and experience negotiating. Not everyone has the data or the experience. Luckily, ShipSigma has all of that and more.

Negotiating Tips

Before you begin your shipping contract negotiations it’s important to know what carriers like UPS and FedEx care about on their end. Here are just some of the information that shipping carriers will need to know in order to create a proper contract:

  • The average weight per package shipped
  • The average numbers of shipments coming and going on a daily basis
  • The average zone in which you ship to
  • The percentage of minimum charge shipments
  • The percentage of packages shipped that fall under dimensional weighting

Data aside, knowing some simple do's and don’ts when negotiating your shipping contract is important. Things to know:

  • Give carriers deadline on negotiations upfront to keep carriers from dragging their feet. Be clear that if the deadline passes without a signed contract that you will take your business elsewhere.
  • NEVER waive your right to guaranteed service refunds. Your carrier might request this during your negotiation but you’re not obligated to and you’ll lose money in the end so stand firm on this.
  • Negotiate everything.
  • Always read the fine print.
  • Let them go first. This allows you to properly prepare for terms that you might not have anticipated.
  • Guaranteed volume penalty clauses - DO NOT SIGN
  • Shop around! Start negotiations with UPS, FedEx, USPS and any other available parcel carriers you might be interested in. Let them fight for your business.
  • Switch carriers if that’s what’s best for you. If you find someone that will give you a better deal then go for it.You can give your current carrier the chance to match their competitor’s rates if they want to keep your business.

Everything is negotiable with enough data to back it up. Here are just a few rates that you can and should negotiate before signing your carrier’s shipping agreement:

  • Delivery area surcharges
  • Next-day air rates
  • Second-day air rates
  • Extended delivery area surcharges
  • Dimensional weight (DIM) factor
  • Signature surcharges

There might be certain terms of your shipping contract that are more important than others depending on the type of shipping your company does. A company that manufactures and ships large items will save more money if they focus their negotiations on Dimensional Weight rates compared to focusing on signature surcharges. The key is to figure out the value of each term in relation to your business.

Carrier contract negotiation can seem intimidating but it doesn’t have to be. The easiest way to ensure the best shipping rates possible is to partner with a parcel auditing company with the technology and experience necessary to argue your case. At ShipSigma, we know shipping carriers inside and out and we have the data to back you up.  Contact us today for a free evaluation.

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