Small Parcel Negotiation

May 16, 2022 Deyman Doolittle

If you ship in any capacity, you have dealt with shipping contracts through a variety of carriers. This means you understand the importance of the negotiation stage to ensure you can operate your business with the lowest shipping cost possible. With small parcels, you often deal with larger capacity orders that are more frequent, which means the rates outlined in your contract will significantly impact your bottom line. Partnering with an organization like ShipSigma to perform a parcel invoice audit is one of the best ways to both get a clear picture of how good your current rates are and better equip you with accurate data for your next negotiation.

A small parcel audit is just one of the ways that you can save money by identifying overcharges and failures by the carrier, but the focus of this blog will be on how you can bolster contract negotiations with your carrier moving forward.

Rate Negotiation in Logistics

Rate negotiations can often feel like battles, as both you and the carrier want to reach a final agreement that will maximize profits. The carriers will run through several factors, like possible rates they can charge for your orders. Even if you feel like the best possible deal for your company has been reached, it will often lean in favor of the carrier.

How to Negotiate Shipping Rates with UPS and FedEx

As UPS and FedEx continue to raise their rates, negotiating a favorable contract has never been more critical to the success of your shipping efforts. Just as you speak with several different carriers about a possible agreement, the carriers talk with even more shippers about the same kind of deal. This means not having as much information at your disposal when you enter a negotiation can lead to costly mistakes. Here are some tips on negotiating a better shipping contract to aid your team.

  • Lead with Data: Carriers hear all kinds of stories from shippers about their success and what an agreement with their company could mean for them. While a compelling story is important, it is best to let the data do the talking for you. Acquiring your shipping insights and analytics from ShipSigma allows your team to gain instant shipping intelligence with actionable insights based on every package shipped compared to your contractual obligations and industry benchmarks.
  • Understand Discounts: Both UPS and FedEx offer discounted rates. In the same way they can apply surcharges to your shipments, you can utilize these discounts to keep your rates low. One of the more common discounts these carriers offer is volume-based discounts. Negotiating a volume-based discount means that the more you ship with that carrier, the more you will save. A less common discount you can negotiate for is called a guaranteed discount. You will get a flat rate regardless of how much or little you ship with this discount.
  • Ship with More Carriers: By shipping with different carriers, you will better understand average prices for your shipping needs when you negotiate your next contract. The carrier knows you can take your business elsewhere, and using this knowledge can give you the upper hand.

Getting the best contract possible no longer has to be a guessing game when you partner with ShipSigma. Our platform will give you all of the necessary data in order to know exactly what your savings can be before you even start the negotiation.

Why is Contract Negotiation Important?

The only effective way to keep your shipping rates down is to negotiate a contract successfully. In 2020, more than 131 billion parcels were shipped worldwide. This means that carriers like UPS and FedEx will have endless contract options presented to them. Not only are you working with carriers to settle on a contract, but you also have to beat out your competitors who are trying to put together a more appealing contract. A shipping contract is not an item you can complete and forget about. From carriers not following through on their end to the needs of your business changing, contract negotiations are an ever-evolving challenge to overcome. Luckily, you don't have to go through it alone.


ShipSigma: Negotiate Contracts with Ease

Our team was built by former members of both UPS and FedEx, and we have the knowledge from being on both sides of these contract negotiations. To be clear, our goal is not to overtake this process from your company. You are the expert for your business's needs. We simply step in and provide you with the tools that can assist your team in obtaining the best possible contract.

Try it for free today to find out what the ShipSigma difference really is. 

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