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Lack of negotiation skills is not an issue, with the right information you know what will benefit your company. FedEx and UPS both provide all the information you need! If you are unable to evaluate a full years worth of a data, try to focus on 3 invoices that truly represent your average shipping weeks.
Here is a basic strategy to help you along the way.
Workflow – work smarter
A standard procedure to follow in executing a renegotiation involves the steps detailed below.
Step 1: Collect Carrier Pricing Agreement
Be sure to get the most recent agreement and any addendum. You can contact your carrier representative for this information.
Step 2: Collect Shipping Data
Download as much shipping activity from your carrier invoices as possible. Use several invoices to account or peak seasons. We recommend a full year’s worth of invoices.
Step 3: Develop a Shipping Profile
For each service level, determine total costs, number of packages, average costs, zone and weight distribution.
Step 4: Determine Your Most Utilized Service Levels & Actual Discounts
What are your realized discounts for each zone and weight range?
Step 5: Calculate Your Top 20 Accessorial Fees
Know the total number of charges, the average cost for each charge, and the total costs for each accessorial fee. If close to year’s end, enter new accessorial fee price increases to estimate next year’s projected costs for these fees.
Step 6: Determine Ideal Discounts & Incentives
This is where benchmarking comes in hand. Knowing realistic rates based off of similar-sized shippers will allow you to project feasible savings.
Step 7: RFP/Request For Proposal
For each heavily used service, use our downloadable form to specify your desired rates for each zone and corresponding weight range. Don’t request additional discounts for rarely used services. For example, if you shipped UPS Standard only 10 times last year, don’t ask for additional discounts for that service. Determine what, if any, accessorial fees you would like to receive a discount on. Send RFP to each carrier.
Step 8: Review Proposal From Carriers
This is the toughest part. Did they meet all of your discount requests? Make sure the discounts are not tied to unreachable discount goals. Be sure you didn’t waive the right to request late delivery refunds.
If everything looks good, execute new contract.
When to renegotiate
There is really never a bad time to evaluate your pricing agreement and renegotiate. Renegotiating every year is a good idea. Renegotiate when discounts are expired or expiring. Custom Dimensional Weight Divisors (DIM), for example, typically expire within 12 months.
Look at the big picture
- EVERYTHING is negotiable
- Never accept waivers for on GSR service failures
- Never accept agreements that penalize for early termination
- Submit a RFP to multiple carriers
- If you have concessions (ie. DIM or residential reductions) that expire, review them before the expiration term
- Renegotiate every 12 months, you might be surprised with new concessions they offer