02 Aug FedEx and UPS Contract Negotiation Tips
FedEx and UPS Contract Negotiation
It’s a phrase uttered often in business: “Everything is negotiable.” When it comes to FedEx and UPS contract negotiation, this especially holds true. No matter which shipping carrier you use to ship your products, you can negotiate the rates and some times, even more importantly other terms of your contract like accessorial fees. We’ve seen certain fees or shipping rates reduced 50, 70, or even 100%.
In every carrier agreement, there are certain terms which are explicitly defined including rates, fees, and guaranteed service refunds. In short, the contract spells out the designated amounts shippers will pay for specific services. To get the best rate, you must be proactive about requesting refunds for late deliveries, lost packages, invalid surcharges, and other glitches. You should also try to negotiate the best possible terms upfront. To do this, you need to empower yourself with the data to back up your negotiating points.
“Investment in knowledge pays the best interest.” Ben Franklin
Carriers have an immense amount of data coming into the negotiation and for the best outcome possible, you should too. If you can’t gather these numbers yourself, there are many small parcel auditing tools out there to help. These services will pay for themselves. Armed with data, you can maximize your UPS or FedEx contract negotiation and get the best possible terms and shipping rates. Before you can negotiate it’s important to know what’s driving your specific costs. It is often the case that negotiating a fee down saves way more money that another 2% off the base shipping fees. Likewise, with negotiating down you DIM factors. But you have to know where your costs are currently going and how to forecast the potential changes.
Aside from that, there’s another shipping method to investigate if it works for your business: LTL freight shipping to save money. LTL stands for “less than truckload,” meaning that your freight is not large enough to fill an entire trailer. Compared to “full truckload” (FTL) services, LTL could save you money because you’re paying for only the portion of the truck your freight occupies
We’re a free do-it-yourself platform. We don’t believe in paying for things you don’t absolutely need. Contract negotiation with giants is not one of those times. Don’t like the idea of hiring an outside party to help lower your shipping costs? Consider the following:
- Time is money. The time value of money is one of the basic premises taught in finance 101. Don’t fall for the myth, “if I can get 5 percent savings myself, why should I pay someone to get me 10 percent?” Savings are savings. In many cases, it’s more cost effective to pay someone to do the research for you.
- Every negotiation counts. So, you should optimize every negotiation every time. The best way to do this is by backing your argument with the right information. An outside party can help analyze your parcel agreements and compare them to others with shipping profiles similar to yours. Remember, every shipping since the dawn of man has been told they have the best rates possible. We’ve literally seen thousands of agreements (including some of the biggest in the world), you’re not getting Amazon’s rates.
As you enter into FedEx and UPS contract negotiation, it’s also important to know the characteristics that matter most to the other side, the carrier. Before they finalize your contract, a carrier will want to know the following:
- The average weight per package shipped
- The average zone
- The average numbers of shipments inbound and outbound per day
- The percentage of minimum charge shipments
- Common accessorial and surcharges and whether changes can be made to avoid any of them
- The percentage of packages moving under dimensional weighting
Beyond the data, it also helps to use effective negotiation tools. First and foremost, never wave your right to guaranteed service refunds. Carriers often ask customers to do this as part of the negotiation process, but it will never pay off. Here are some other tips:
- Make everything negotiable.
- Put a clear timeframe on the negotiation upfront so carriers can’t drag it out
- Look at all the fine print
- Make them show their hand before you show yours
- Do not sign guaranteed volume penalty clauses
You should also avoid pigeonholing yourself into one carrier. Shop around for the best possible agreement and invite all options to the table, including UPS, FedEx, USPS, and regional parcel carriers. If you don’t look at all possible shipping options and compare fees, you’re really only negotiating with yourself. Also, don’t be afraid to switch carriers if you can find a better deal somewhere else. It sounds more painful than it actually is.
“By failing to prepare, you prepare to fail.” Ben Franklin
As you negotiate, it’s also critical to know exactly what terms you can argue. Going back to our original theme, every part of your shipping contract is negotiable. Every part. Empowered with data, you can negotiate rates for all services, including the following:
- Next-day air
- Second-day air
- Delivery area surcharges
- Extended delivery area surcharges
- Dimensional weight (DIM) factor
- Adult signature surcharges
- and more!
Keep in mind every company is different and you should consider how the fees for these services will affect your shipping profile. For example, if you ship larger items, you’re probably not as concerned about your base shipping rate, because you will be charged for oversized weights that exceed dimensional weights (DIMs). Instead, you could save more money by negotiating your DIM charges to a lower rate. If you are a company that deals with Direct Signatures Required, you may be able to negotiate your signature services required down to have a bigger impact on your profits than if you negotiate a base percentage off your overall shipping rate. If you are an international shipper, you’ll get the best deal if you negotiate the domestic and international rates at the same time (often carriers will do domestic first and international later, which doesn’t pay for the shipper). By knowing the value of each of your negotiation items, you will know where to ask for the discounted rates, be it a higher discount or a lower minimum.
To maximize your FedEx or UPS contract negotiation, you need empower yourself with the data that tells you where your costs are coming from and how lowering them can affect your bottom line. To do this, you need a partner who has the experience, who has seen hundreds of these contracts, and who knows how low shipping carriers will go. As you undergo UPS or FedEx contract negotiation, look for a partner that offers a data-based approach and can analyze your parcel agreement and compare it to others to get you the best possible deal.