26 Feb Don’t Let Them Catch You Unprepared—What to do Before You Negotiate Your Small Parcel Rates
One of the most effective ways to reduce freight spend is to renegotiate your small parcel contracts in an effort to lower your rates with your carriers. This is obvious enough, but to do it right takes the right approach.
Negotiating shipping contracts can be a complex process due to all the things that go into a small parcel shipment’s cost. Add to that the many differences that exist from carrier to carrier, like rate bases, incentives, and surcharges.
However, a little preparation prior to the start of negotiations will give you an advantage. Carriers always have a range in the rates they provide to their customers, but it is up to you to understand market-appropriate pricing for YOUR company.
The following tips will help you get the best rates from your small parcel negotiations.
Know Your Shipping Profile
Your shipping history is a good place to start preparations for a negotiation. Gather your shipping data and create a profile of what your shipping program looks like. The data should be inclusive of your shipping lanes, volumes, and any accessorials and special services you require. If carriers do not have this information when calculating the pricing they’ll offer, your pricing will default to higher levels because the carrier is less confident about what it will cost to service your business.
Include Multiple Carriers in the Negotiations
If you have an incumbent carrier, you do not necessarily need to only negotiate with them. A lot of companies have their preferences, but a single-source strategy for carrier partners will seldom produce the lowest rates. By including one or two more carriers in the process, you can be sure you are getting the best rates and service. The point is you want to make them work for your business and be ready to play them against each other to get the best contract for your shipping needs.
Request an RFQ
A formal, customized Request for Quotation (RFQ) shows carriers that you are serious about the negotiation and that you want to be able to evaluate their rates thoroughly. Carriers’ rates and services can be difficult to evaluate against one another; however, a centralized process to analyze submissions makes it easier for you to make the best decision.
Beware the Rebate
Don’t accept a rebate on your annual spend in place of a discount on rates. This could deny you the chance to audit and ask for money back on overcharges or failure of service. You will most likely lose more in the future than you will gain by accepting a rebate.
Down the Road
Your current shipping patterns are important in the negotiation process, but relay to your carriers how your business will change in the next year or two as well. For example, if you are launching a new product that is different from your existing package dimensions, your pricing could be impacted.
Sometimes, negotiation is best left to the experts, so working with a 3rd party can give you leverage during the negotiation process. Carriers are experts at knowing the market and their costs, as well as the “art” of negotiation. Your approach towards negotiation is important — so taking the time to prepare before the negotiation and getting the help of an expert will give you the best chance for the best rates.