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Scenarios in which to negotiate a new contract with shipping carriers

by BlogCost Optimization

Are shipping companies satisfied with the services provided by shipping carriers?  Also, are shippers overspending on their parcel shipment?  Shipping contract negotiations with shipping carriers can address these queries. Shipping companies require contracts that provide quality service at the best price.  So, shippers can reduce shipping costs at each stage. This article covers the kind of improvements to existing shipping agreements. We will also discuss the scenarios for the preparation of new or renewal of shipping contracts.

Shipping contract negotiations

Shipping companies enter into shipping contracts with carriers for parcel shipping.  Shippers have to know their shipping profile when negotiating with shipping carriers. Shipping companies must understand what the fine print of the contract says. As the shipping rates change every year, shippers need to keep a tab on the shipment costs. In addition, over time, shippers may realize that some parts of the agreement need improvement.

What are the improvements to be made to existing shipping agreements?

Shipping companies view information on shipment details. The shipping reports provide them information on the number of packages, total spend, services, etc. They want to see improvement in the delivery services and costs.  As a result, they examine the shipping agreements to make any improvements. These improvements could be in Dim divisor, surcharges, earned discount and base discount, minimum, MRA, etc.

Scenarios for preparing shipping contracts

Shippers are looking for ways to renew shipping contracts that benefit them. Alternatively, they are searching for shipping carriers that offer competitive prices with quality delivery service. There are five scenarios that shippers look at based on data inputs and other parameters.

  • Optimization of existing shipping agreement

Initially, when shippers and shipping carriers sign shipping agreements, the parameters are different. These parameters include surcharges, accessorial charges, weight calculation, minimum charges, and more. Each year, these charges vary due to new regulations. Consecutively, the shipping costs on each package increase every year. So, to optimize existing shipping agreements, parameters including discounts, MRA, Minimum, Dim Divisor, Surcharges are considered. For example, shippers need to review the respective carrier’s Money-Back Guarantee regularly to receive the refunds due to them.

  • Change in existing shipping contracts for cost-effective services

Existing shipping contracts require change when the services are costly. Components such as maximum weight, zone, etc., interfere in providing cost-effective services. In the case of short-distance shipments or not urgent packages, it is wise to choose cheaper services. For instance, shippers change from one service to another service that costs less for shipments.

  • Use of alternate shipping carriers for business profitability

Shippers use multiple shipping carriers to increase their business profits. The shippers have an understanding of what the competitors are offering. While negotiating shipping contracts, shipping businesses can shortlist the shipping carriers that bring them profits. If a shipper is not happy with a particular carrier’s terms and conditions, they can opt for alternate carriers which have better terms and conditions suitable for their business.

  • Expired shipping agreement

For a shipping agreement that will expire in a year, shippers can consider a new shipping agreement or renew the old one with new terms. Shipping companies can set their timeline for the termination of the shipping agreement. They can put favorable terms and conditions in the shipping contracts that improve their bottom line.

  • Discontinuation of services of shipping carriers

Shipping contracts with shipping carriers should give prominence to quality service. But if the services are causing harm to the shippers’ profits, it is best to discontinue those services. For instance, if a shipping carrier does not provide accessorial discounts to domestic Air express services. Then it is best to shift to another shipping carrier that provides these services.

How is partnering with Audintel helping shipping businesses?

Audintel plays a vital role in empowering shippers to get the best out of their shipping contracts. Our experts analyze the data and also review and improve the shipping contracts of our clients. We point out any deficiencies in the shipping contracts. Audintel helps in improving the shipping costs for shippers. Audintel helps clients understand the intricacies of an existing shipping contract. And if necessary, we help to negotiate a new shipping contract on the clients’ terms.

Conclusion

When negotiating shipping contracts, understanding shipping rates is vital. Also, the reliability and efficiency of the shipping carriers are essential. Shipping contracts should be beneficial for both shippers and shipping carriers. Audintel helps you in cutting shipping costs and balance your bottom line. If you need help in shipping contract negotiations, contact us at [email protected]. You can also learn about our services by visiting our Audintel website or call us at +1 (619) 354 8539.

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Why incorporating GSR/MBG waiver in shipping contracts is a bad idea?

by BlogCost Optimization

On-time delivery of shipments is vital for shippers. Late parcel deliveries test a customer’s patience. At times, customer dissatisfaction leads to financial loss. With this in mind, shippers have a refund clause in their shipping contracts with the shipping carriers. Shipping carriers promise a refund for service failures such as late deliveries.

Approved late delivery refund requests save 100% shipping costs. But, in the past few years, FedEx and UPS are offering shipping refund waivers with incentives. Large shipping carriers are aggressively vouching for refund waivers. So, what are these shipping refund waivers? And, why should shippers not accept such Guaranteed Service Refund waivers? Read on for all this and more, in this article.

What are shipping refund waivers?

Shipping carriers like FedEx and UPS offer shipping refund waivers. Shipping refund waivers are clauses within the shipping contracts that provide discounts to shippers. These discounts are in return for waiving off the shippers’ rights to claim refunds. FedEx’s refund waiver is known as Money-Back Guarantee (MBG) waiver. And UPS’ refund waiver is known as UPS’ Guaranteed Service Refund (GSR) waiver. In addition, UPS and FedEx aggressively market these waivers to shippers for earning extra revenue.

Incentives in exchange for GSR waiver

Often shipping carriers offer discounts and incentives in exchange for signing an agreement with Guaranteed Service Refund waiver.  Shipping carriers who want GSR waivers entice shippers with attractive discounts during contract negotiations. The incentives include an additional package rate discount and small discounts in the accessorial charges for a short period. But, shippers generally don’t benefit much from these incentives, as there are other charges on the package.

Why should shippers not sign an agreement with UPS’ GSR or FedEx’s MBG waivers?

UPS’ GSR ensures the on-time delivery of all Ground and Express Packages.  When shippers sign GSR waivers, shipping carriers can no longer be held accountable for late deliveries. For instance, a parcel’s delivery time is the same day, but the delivery occurs the next day. The customer will hold the shipper responsible for the delay and not the shipping carrier. The shippers cannot demand a refund from shipping carriers on signing a GSR waiver. As a consequence, shippers face loss of revenue and customer dissatisfaction. That is why Audintel strongly suggests that shippers should not sign agreements with UPS’ GSR or FedEx’s MBG waivers.

Disadvantages of accepting shipping refund waivers

The disadvantages of accepting MBG waivers include lost customers, an increase in returned shipments, etc. Packages that are delivered late are a chief reason for shippers losing customers. Minimum service charges on each parcel eat away any discounts received on account of the GSR waiver. FedEx may offer an additional package rate discount with an MBG waiver. But, when FedEx applies minimum service package charges, these additional discounts will be negligible and lead to revenue loss. According to recent studies, waiving away MBG rights will cost shippers 1-5% of their entire parcel spend.

How can Audintel help?

Audintel has a well-experienced team of experts who are well-versed in contract negotiations. We compare the services of the shipping carriers before signing a contract. Audintel studies the fine print of each shipping contract with shipping carriers. We will help in getting you discounts while keeping the Guaranteed Service Refund clause intact. We ensure that our clients save more by not signing an agreement with a GSR waiver.

Services offered by Audintel concerning GSR Waiver

Audintel will never suggest a GSR waiver for its clients. We believe the credibility of the client will be affected by accepting the GSR waiver. When a GSR waiver is signed, shippers cannot question the shipping carriers for late deliveries. Shippers’ business gets affected due to delays in parcel deliveries. Shippers are in safe hands when they trust Audintel to manage their shipping portfolios. We not only track each parcel for late deliveries but also request for GSR. Our services help our clients receive the refund amount due to them. As well as enhance customer satisfaction bringing in more business for our clients.  Audintel holds the shipping carriers responsible for deficiencies in services. We can save at least 2-5% of overall parcel spend for our clients.

Late delivery refunds are essential for the small parcel industry. Late delivery refund claims save money for shipping companies. There is an estimate that over 3 billion dollars from unclaimed refunds are collected by UPS and FedEx when shippers sign GSR waivers. The refund amount belongs to shippers but, the amount remains unclaimed due to lack of auditing and claim processing. Shippers need professionals who can help them in monitoring their shipment portfolios at every stage. Audintel provides encompassing audit services to its clients. We help in analyzing your shipping spend and save money. Audintel is a name you can trust for auditing parcel services. For further details, write to us at [email protected] or please visit our Audintel website, or contact us at +1 (619) 354 8539.

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Best Practices For Shipping Contract Negotiations

by BlogCost Optimization

Shipping contract negotiations are essential for the shipping business. They help in saving the costs of the shipping companies. However, contract negotiations are complex and time-consuming. The negotiations have to be mutually advantageous to both clients and carriers. There needs to be transparency and open communication. With this in mind, let’s explore the best practices in shipping contract negotiations.

To begin with, let us understand: What are Shipping contract negotiations?

Shipping contracts are legal documents between a client and a carrier. The regular review of contracts is necessary to increase the shipping business of client with carrier. Shipping carriers like UPS and FedEx announce rate increase periodically. Therefore, it is essential to track the rise in shipping spend. The shipping contract negotiations relate to services, weights, accessorial charges, and more.

There are different kinds of shipping contract negotiations such as:

Small Parcel contract negotiations

Small Parcel contract negotiations involve reading the fine print of the contract with the carriers. Shippers need to review their service contracts regularly. In addition, they have to be aware of the incentive offers and discounts. The shipping contracts should list all the services that are essential for shippers. In addition, it should give clarity about surcharges and tariff rules. Nonetheless, negotiating the best parcel rates requires careful planning and monitoring. Audintel services help small parcel businesses in shipping data analysis, optimizing agreements, and reduce parcel costs.

Freight contract negotiations

Negotiations regarding freight contracts include volatile freight rates. In addition, negotiations should consider unforeseen surcharges. Also, there should be clarity in the contents of the freight contracts. Factors such as rates, routes, services, free days, space protection, surcharges, and credit terms play a vital role in discussions. Negotiating freight rates is a complex process, which experts at Audintel are good at handling.

Negotiating rates with carriers

For successful negotiation of shipping contracts, shippers need to know the carriers and their services. Even after finalizing a shipping contract, new surcharges and tariff rules can emerge. Re-negotiations are necessary when an existing shipping contract does not align with a company’s business. Audintel has insights on the working of the carriers. Their team of experts will help in negotiations that are favorable for shippers.

The Best practices followed for negotiating Shipping Contracts are:

  • Gathering relevant data

Before starting negotiations, shippers should have relevant shipping data. The data contains the past performance of the shipping carriers.  Reviewing the historical shipping data gives an insight into the most frequent shipping zones, etc. Moreover, the data helps in identifying the rates and factors to determine the transportation needs. Audintel reviews the historical data for providing to-the-point negotiations.

  • Request for Proposal (RFP) drafts

Shippers send out Request for Proposals (RFP) after gathering data. A good RFP encourages potential carriers to give clients the best, competitive contract. The draft of the RFP includes the background of the shipping company and the types of products sold. Further, it should contain the shipping history, delivery requirements, and terms. RFPs help shippers in reviewing carriers’ proposals and compare their offers. Audintel takes a close look at RFP drafts and suggests shipping carriers to their clients.

  • Identify accessorial charges and surcharges

Shippers need to reduce additional expenses during shipment. The additional fees are also known as accessorial charges for carriers like FedEx and UPS. These charges occur where there is redelivery of packages, residential deliveries. Further, surcharges include fuel surcharge, after-hour deliveries, Saturday Delivery, additional handling, etc. Audintel helps in identifying the extra expenses. Audintel suggests cost-effective charges so that the shippers can save money while negotiating with carriers.

  • Review packing strategy: Dimensional weight Pricing (DIM)

The majority of the shipping carriers use a pricing technique called DIM weight. The dimensions of the package are in consideration for the price calculation. Shippers can cut shipping costs by reviewing the packing strategy. Packaging odd-sized materials require efficient use of packaging material. In addition, Audintel can negotiate with shipping carriers to improve the DIM divisor appropriately for shippers. As a result, it will reduce shipping costs.

  • Use of carriers

For better negotiations, shipping companies can use multiple carriers or single carrier for effective cost.  It leverages competition between the shipping carriers so that shippers get the best price for their business. As a result, shippers get better rates. They can choose the shipping carrier with the best delivery performance and rates. Audintel suggests alternative shipping carriers based on the parcel spend characterisitics.

  • Know the terms and conditions of the contract

Before signing shipping contracts, it is necessary to read all the clauses. It is essential to understand the terms and conditions of the shipping contract. There is a need for regular review for open-ended negotiations. Shippers need to thoroughly read the shipping contract and assess what will be beneficial for business. Audintel helps shippers understand the intricacies involved in the shipping contract negotiations.

The novel approach adopted by Audintel

Audintel follows the above best practices. And we have a novel approach towards contract negotiations. We have an intelligent mechanism in place to enhance your savings. The holistic approach adopted by Audintel is advantageous for clients.

Finally

It is vital to have good relationships with shipping carriers. A business negotiation based on mutual respect and trust will go a long way. Having a good rapport with the shipping carriers will ensure successful shipping contract negotiations.

When you sign up for services from Audintel, negotiations become simple. For further queries and details, write to us at [email protected] or visit our website Audintel, or contact us at +1 (619) 354 8539.