Mar 19, 2018
Every logistics manager knows the importance of their carrier relationships. A lot is riding on your carrier—protection of your goods, budget, on-time delivery, and your customers’ satisfaction level. When it comes to negotiating a parcel contract, many logistics professionals take pride in being able to negotiate the best shipping
Because they do it every day, carriers know their way around a contract. After all, it is under their terms, and the success of their company is dependent terms and rates; however, don’t discount the idea of having a third-party consultant help with your small parcel contracts. The information they have access to can make a significant difference in your rates. on how well they can negotiate. Shippers, on the other hand, don’t have nearly the same amount of experience with contracts. But skill level comparisons are not really the issue; it’s about who has access to the most accurate and relevant information that will give them the upper hand. In 99.99% of negotiations, it is the carrier.
Shippers who negotiate alone are at a clear disadvantage, but using an outside expert is one way to be on a level playing field with carriers. There are several ways in which a consultant can provide value during the negotiation process.
Each and every shipper wants rates that are competitive, and wants to make sure they are not overpaying for their shipping services. However, shippers have no knowledge of where market prices are, but a third-party expert who sees a lot of contracts, does.
Market trends will affect your contract negotiations, but unless you regularly invest a lot of your time following them, you will be at a disadvantage. For example, the recent GRI announcements will affect your small parcel rates, but understanding exactly how is difficult. Knowing the long-term influence on the market and how to plan for it is even more difficult, yet contracts are based on where the industry is going, not where it is today.
While it is important to know what the going rates are, it is just as important, if not more so, to know what the carriers’ costs are to service your business. Since your company has its own routes and volumes, competitors’ rates are only part of the equation. A carrier’s costs matter more in pricing models and their strategy. An expert who understands this can guide you to what you should be getting from your negotiations.
From a shipper’s perspective, lower rates are the ultimate goal of small parcel negotiations. A shipping consultant can give you access to key information to put you in a better position for your negotiations. Obtaining access to this valuable information is the only way to get the competitive rates you want.
Leveraging a third-party expert for contract negotiations is just one best practice for managing small parcel spend. Get additional best practices, industry insight and expert tips to help you optimize your small parcel spend in The Ultimate Small Parcel Playbook.
This post was originally published on the Transportation Impact blog on December 4, 2017.
Jillian Farrington is the Marketing Coordinator at Transportation Impact.