How to Prepare for a Small Parcel Rate Negotiation: 5 Key Pointers
Renegotiating your small parcel agreements in an effort to lower your rates with your carriers is an effective way to lower your overall shipping spend. But don’t make the mistake of going in to the negotiation insufficiently prepared.
You know how many factors can affect the cost of a single parcel shipment — it’s a complex calculation, and your small parcel agreement is a hundred times more complex. When you add in the many differences that exist from carrier to carrier, like base rates, incentives, and surcharges, you can see how preparing well for the negotiation is crucial. You want to have all your data at hand along with a good picture of your needs both now and looking forward over the next year or two.
So here are five key pointers for how to prepare yourself to succeed in your next small parcel rate negotiation. We hope you find them useful.
What’s Your Shipping Profile?
This is the starting point. Your shipping data will enable you to create a profile of your overall shipping landscape. Accurate data on your shipping lanes, volumes, and any accessorials and special services you require will also allow your carriers to calculate more accurate pricing for you. Without this specific information, they’ll default to higher pricing because they won’t be so confident about what it will cost them to service your business.
Don’t Limit Yourself to Only One Carrier
You are free to negotiate with other carriers in addition to your incumbent or the one you use most. A single-source strategy for carrier partners will seldom produce the lowest rates. Include one or two more carriers in the process, and you can be much more confident of getting the best rates and service. It’s like any situation where a company has a monopoly or takes your business for granted — they’re less likely to act competitively to get and keep your business. Don’t be afraid to play the carriers against each other to get the best agreement for your shipping needs.
Show You’re Serious
By presenting your selected carriers with a formal, customized Request for Quotation (RFQ), you’ll show that you are serious about the negotiation and that you want to be able to evaluate their rates thoroughly. However, because it can be difficult to evaluate and compare different carriers’ rates and services, a centralized process to analyze submissions will make it easier for you to understand who is offering you the deal that best fits your needs and parameters.
Rebate Does Not Equal Discount
Be very wary of accepting 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. A rebate is likely to end up being a losing proposition for you.
To really help the carriers give you pricing that will serve you well not just today but also in the medium term, be sure to explain (with data if possible) how your shipping profile is likely to change in the next year or two. For example, if you will be launching a new product with different package dimensions or you’ll be moving into new lanes, your pricing could be impacted.
It takes a fair amount of time and effort to prepare well for a small parcel rate negotiation, and it can be easy to get lost in the sea of data, so sometimes working with a 3rd party can be a cost-effective way to get leverage during the negotiation process. Carriers know the market and their costs extremely well and they’re experts at negotiation. This is an advantage that a 3rd party also has, so partnering with an expert can level the playing field for you and give you the best chance for the best rates.
At First Flight Solutions we believe you should always have the best rates for your small parcel shipping. For this reason, we provide small parcel rate negotiation and invoice audit services to large-volume FedEx and UPS shippers. We’ve saved hundreds of companies over $100MM in the past ten years. To learn more, visit www.firstflightsolutions.com.