Pro Tips for Negotiating Shipping Contracts
Do you want to reduce your shipping spend and increase profitability? Then it is time to negotiate your contracts and take control of your parcel costs.
Business owners are faced with tough decisions every day and often find themselves overloaded with the minutia of growing and maintaining a company. This is why so many resign themselves to subpar shipping contracts and merely ask where to sign when those contracts come up for renewal.
As carefree as that may sound, it is not a good idea. Without proper contract review and competitive research, your company could be hemorrhaging money without anyone’s knowledge.
Here’s the thing, shipping can account for nearly half of some retailers' operational budgets, and on average, shipping carriers increase their rates between 4.9 percent and 6.9 percent, year over year.
If you want to reduce your shipping spend and increase profitability, then it is crucial that your parcel costs remain in your control. How do you do that? By regularly re-visiting your current pricing and carrier selection, and then negotiating your contracts accordingly.
Here are a few tips for reviewing and negotiating your shipping contracts:
1. Review your contracts, cover to cover. Yes, even the fine print. Don’t feel bad if you don’t understand all of the terminology within the contract. Your carrier doesn’t expect you to, and it’s one of the many ways they can quietly overcharge you. Just make note of everything that is unclear and seek guidance from your carrier’s representative or freight consultant to help you decode the language.
2. Don’t be afraid to ask. Certain discounts, like base incentive discounts that are generally expressed as a flat percentage for each individual package, and volume-based discounts which are based on shipping volume, are not always included in your contracts. As the shipper, it will behoove you to educate yourself on the various types of discounts available, and then ask your carrier to include them.
3. Dig for accessorial charges. You may be surprised at how many extra surcharges you’ll find once you start looking for them. Accessorial charges, or fees charged for additional “services” that your carrier provided, are most often outside what is viewed as the confines of standard shipping and receiving. Things like delivery and large package surcharges, residential surcharges, address corrections, and additional handling charges all fall within the realm of accessorial charges. Once you understand all of your extra shipping charges, you can target the appropriate discounts in your negotiations.
4. Analyze your data and needs. Before entering into negotiations, you need to have a solid understanding of your shipping volumes and overall shipping needs. From there, you can start to research market prices and benchmark them against your current rates. In addition, try to remember why you chose your current carrier to begin with. Was it based on their level of service, cost, or timely performance? Once you’ve nailed down the factors that led you to this carrier in the first place, you can reevaluate their performance and decide if they still align with your current needs.
5. Use the competition to your advantage. Doing your homework on a few different carriers will only strengthen your negotiations. Remember, the biggest players in the industry, like UPS and FedEx, are in competition with each other, so understanding and sharing each one’s unique benefits will provide them with the impetus to match or beat those perks.
6. Claim your right to refunds. That’s right, refunds. Wondering why your carrier didn’t tell you that you were eligible for refunds? Likely because they didn’t tell you that you had a right to them, and because most would prefer not to pay for their mistakes. Whether they are late delivery refunds or lost & damaged refunds, the shipper is lawfully owed reimbursement based on various carrier missteps.
7. Get an expert opinion. Just like you would with a medical diagnosis or shopping for a car, getting a second opinion will help you to see things from a clearer perspective. Connect with your refund and audit service and ask the same questions you ask your carrier representatives. They can help you access and analyze your shipping data, understand the fine print of your contracts, and guide you in the negotiation process. Remember, there is no one-size-fits-all strategy when it comes to negotiating carrier agreements, and having a partner to advocate for your best interests can make all the difference.
At 71lbs, it’s our mission to clarify the shipping process for our clients, making it easier and faster for them to access refunds and optimize their expenses. Our human-operated platform helps gather all your shipping information into one easy-to-use custom analytics dashboard which puts everything at your fingertips. Drop by the contact page for ways to get in touch.
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