4 Common Tricks Used by Parcel Carriers in Contract Negotiations

As a business owner, your first priority is ensuring that your packages arrive on time and intact to your customer (external or internal). Secondarily, you are looking for the most economical means to get your product to market. The pressures brought on by Amazon Prime in delivering your packages in 1-2 days for free has put an enormous burden on other retailers to stay competitive. In trying to get your total delivered cost as low as possible, keep a few important things in mind during your next parcel contract negotiations.

Negotiating with parcel carriers for the best deal can be a challenge, due to the complexity in the contracts. Watch out for these 4 underhanded tricks. Click To Tweet

Navigating the Contract Negotiation Process

As you discuss the details and pricing of a contract with your potential parcel carrier, watch out for a few common tricks that could end up costing you more money later on. Ask for more details and a better deal if you notice the parcel carrier appears to be using one of these common tricks:

  1. Highest discounts in areas you don’t use
  2. Earned discount tiers not favorable “enough” for the shipper
  3. GSR waivers
  4. Knowing your shipping data better than you

1) Highest Discounts in Areas You Don’t Use

Most shippers will immediately see the problem here. A parcel carrier that eagerly offers discounts, but mostly in areas you won’t be using, isn’t truly trying to save you money. Knowing what service levels, zones and package characteristics you use the most and focusing on these areas will have a huge impact on your total parcel budget. 

2) Earned Discount Tiers Not Structured Properly for the Shipper

Many shippers aren’t aware of this, but you can always negotiate a carrier contract at any time. While earned discount tiers (ED Tiers) can be beneficial in providing further incentives, you want to monitor your gross spend and understand the entirety of your contract including your discount tiers. These tiers and the discount associated with them are negotiable. Also, the means of calculation is negotiable. As an example, if your package count is very seasonable an ED Tier structure based on your 52-week rolling average could hurt the additional discounting. 

3) GSR Waivers

Some carrier agreements will include a guaranteed service refund waiver. That’s why it’s critical for you to read the details of your contract. Never sign a contract that prevents you from receiving refunds when you deserve them. In many cases, this will be a last-minute addition by the carrier in order to increase their margins. As you recall, we typically see anywhere from 1-8% return on total spend, in relation to filing claims for late deliveries, manifested never shipped, erroneous residential charges, etc. when performing a thorough audit your FedEx or UPS invoice. 

Pro Tip: Never skim through your carrier agreement contract. You could be missing important pieces to the puzzle that prevent you from receiving refunds you deserve!

4) Knowing Your Shipping Data Better Than You

It’s necessary to review your shipping history before negotiating your parcel contract. If you aren’t aware of your previous parcel expenses, shipping zones, package weights, effect of your package size and dim divisor and other factors, you will be at a disadvantage and lose leverage in your negotiations. Now, if your carrier knows your shipping data better than you (which they typically do), you will not be able to negotiate a better deal. In many cases, hiring a professional audit firm that has robust reporting can help provide the reporting needed for you to gain leverage with your carrier of choice. 

Keeping Your Shipping Costs and Process Manageable

As you negotiate shipping rates and other costs with your parcel carrier, keep in mind that the company likely has its profits in mind more than your savings. While this isn’t always the case, it does mean that you need to advocate for yourself, audit your parcels, study your shipping history, and ask plenty of questions to ensure you’re actually getting the best deal out of your parcel contract negotiation.

Connect with us to learn more about shipping cost reduction and balancing your bottom line.