16 Aug Carrier Rate Negotiations for Small Parcel Shippers
Small businesses make up the majority of U.S employers, which translates to a lot of small package freight that moves throughout the country for these companies. With continuous annual rate hikes from UPS and FedEx, small businesses should be reviewing their small package contracts more than once every year or two. Regular carrier rate negotiations are important.
Ecommerce and Small Parcel Shipping
Ecommerce has changed the way small parcels are sent. Customers expect their packages to arrive quickly and correctly, but a business needs to ship at a cost that will not sacrifice margins. The parcel shipping market is more competitive than ever, so a strong carrier contract is necessary to get affordable shipping rates. As ecommerce is changing the way companies do business every day, shipping contracts should be reviewed often to make sure shipping rates are competitive and relative to the market. When a contract no longer fits the way a company is doing business, it is time to re-negotiate.
Don’t Pay Too Much
Most companies have evaluated ways to reduce the cost of running their business. With small parcel shipping, cutting costs has been difficult with yearly rate increases. The level of service from your carrier comes at a cost that is dictated by the market. Some companies are able to take advantage of discounts from their carriers, while others do not negotiate their rates, so carriers end up with a large profit. Your small business might not be paying published rates, but you still might be paying too much based on discounts that other companies are receiving.
Most companies know that a favorable carrier rate negotiations will reduce their shipping spend, but since many small parcel shippers view themselves as customers of the carrier, they do not understand that they have negotiating power.
Carrier negotiations are often more about who has the upper-hand in terms of accurate and relevant knowledge. In almost every situation, the carrier knows more about the shipping habits of a business than they do themselves. A small parcel shipper is already at a disadvantage in negotiations because they are not privy to current market rates. This is why the value of a shipping consultant should not be underestimated. A shipping expert knows where the carriers’ costs are and where the market is currently at.
The Current Market
Contract rates are affected by current market trends. Understanding where the market is going will help to understand current prices and rate increases.
The Fine Print
Shippers should always read the fine print of their contracts carefully. Rules vary by carrier, and can be quite complex to understand with specific shipping terminology. A shipping consultant can help decipher the terminology, make sense of the rules, and how the carrier’s extra charges will affect your business.
Many small parcel shipping companies only visit their contract at its renewal, but reviewing contracts early can ensure the most competitive rates. Getting the best carrier rate agreements can be complex, but a shipping consultant will aid in the process to find the best shipping services at market rates.