Carrier contract negotiation

Do you know everything about carrier contract negotiations?

It’s that time of the year again for evaluating your expenses, especially for parcel and freight shipments. As a sign of good practice, companies should review their contracts with shipping carriers annually. It not only helps in understanding the shipping costs but also in saving money efficiently.

We have discussed carrier contract negotiations in our earlier blogs. Here, we will share experts’ advice on the prudent way to negotiate carrier contracts.

Companies with high shipping volumes can reduce costs with an efficient carrier contract management system. Experienced professionals believe that a well-informed shipper can diligently negotiate on the negotiation table and reduce shipping costs. So, let’s understand the importance of carrier contract negotiations. In addition, gain the know-how to prepare for the negotiation process from experts.

Importance of carrier contract negotiations

Businesses face rising shipping prices and increase their profits while fulfilling customer expectations. So, it becomes essential for shippers to negotiate better carrier contracts and save money. Due to labor shortages, shipping carriers such as UPS and FedEx are increasing their shipping rates. Companies end up paying more to these shipping carriers if their carrier contract negotiations do not cover some services. With an optimized carrier contract, companies can drastically reduce their shipping costs.

Contract negotiation process

It is necessary to understand the complexities of the contract negotiation process for the best deals. Ideally, the contract negotiation process involves understanding the shipper’s shipping volume in different categories. Businesses need to identify their shipping volumes in terms of service with zones keeping their historical data in mind. It helps to identify the service that can fetch more discounts from the shipping carrier. Moreover, additional evaluation of weight slabs helps shippers receive discounts, particularly in specific slabs having high shipping volumes. Further, a proper Dim Weight shipping volume assessment helps reduce the Dim Weight.

Negotiating Parcel Contracts

Negotiating carrier contracts can also involve identifying shipments to specific destinations. For instance, shippers can get discounts, particularly for Western States or Eastern States in the contiguous states within the country, or Import/Export to specific countries. In addition, negotiating parcel contracts brings discounts on fees. The parcel carriers offer discounts on high-volume surcharges can significantly reduce shipping rates.

Experts having vast experience in carrier contract negotiations believe that shippers should know which services attract the maximum discount. During carrier contract negotiations, shippers can target the services that will give them the most rebate. In addition, shippers should clarify the minimums applied to each service. For instance, if the shipper has a high possibility of shipping rates at the minimum, then negotiations should be on the minimum reduction amount on the minimums. Further, shippers should negotiate for a higher dim factor for specific services.

Use of Multiple Carriers

According to experienced carrier contract negotiators, shippers should consider alternative parcel carriers. A shipper using a shipping carrier for a prolonged period may miss out on crucial shipping discounts on specific services. A multi-carrier strategy identifies the current carrier costs for alternative carriers. Companies can compare the current shipping costs of the old parcel carrier with that of the new shipping carriers to help them decide the best shipping carrier for their business.

A better understanding of surcharges

Value-added charges or surcharges may not appear in the initial contract with shipping carriers. But, an accurate assessment of the value-added fees at regular intervals helps companies save money. Shipping surcharges and charges of the parcel carriers change frequently. Some of the fees that see frequent changes are

  • General Rate Increase (GRI)
  • Courier and documentation fees
  • Pallet fees

Carrier contract management can keep track of the surcharges so that shippers don’t pay extra. In addition, carrier contract management supports negotiation strategies with parcel carriers. Parcel contract negotiations require expert management to get a complete understanding of different nuances during the contract negotiation. Companies that do not have an in-house contract negotiation team can always partner with third-party experts.

Get expert opinion from Audintel on carrier contract negotiations

Shipping companies have to understand their shipping profile before entering into contract negotiations. Audintel helps shippers evaluate their historical data to know the areas that can reduce shipping costs. Shippers should pay attention to any changes in the shipping carriers’ fees. Our team provides updates about any changes in the shipping carriers’ fees and surcharges so that the shippers don’t pay more. In addition, Audintel also supports its clients in renegotiating contracts as and when needed. We help shippers to review their carrier contracts periodically to avoid payment of unseen charges in the future.

To sum it up

Parcel shipping is becoming expensive every year. A good carrier contract helps shippers overcome hidden fees and surcharges. Effective carrier contract negotiations at the right time help companies get the best out of their shipping carrier contracts. Audintel’s experts in carrier contracts negotiations help shippers save money. For further information, contact us at +1 (619) 354 8539 or visit our Audintel website.

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Best Practices For Shipping Contract Negotiations

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.