In our previous blog articles, we’ve discussed reasons why you should negotiate rates with your shipping carrier and even tips on how to prepare for negotiations. Now, we’ll discuss WHAT to negotiate. You may hear some say that this fee can be negotiated or that fee cannot be negotiated, but the bottom line is this – you won’t know if you don’t ask. This is not a full list of all negotiable FedEx and UPS value added services, just a few that will make the largest impact on your transportation costs.
DIMENSIONAL WEIGHT PRICING: One of the biggest shipping changes for 2015 is the fact that Dimensional Weight Pricing (DIM weight) will be applied to every package shipped using ground delivery – as opposed to only packages larger than three cubic feet. Take a look at our Blog Post from January 2015 – Dimensional Weight DIM Changes for 2105 for an in depth explanation. Let’s take a look at a domestic ground package example…
But suppose you negotiated this DIM divisor to 250. Your 25 x 28 x 18 package would now have a DIM weight of (25x28x18)/250 = 44.8 pounds. You are now paying based on a 37% decrease in DIM weight.
RESIDENTIAL SURCHARGE: This UPS surcharge applies to ANY delivery to or pick-up request from a home location – yes, even if you are a business but operate out of your home. One of our clients was able to negotiate this surcharge down from the normal $3.50 Air and 3-Day Select and $3.10 for Ground to an average of $2.18. This may not seem like a significant amount, but this particular client was charged a Residential Surcharge over 1500 times in one week – which turned out to be over 5% of their total shipping cost.
DECLARED VALUE (Insurance): Insurance is an area that has several aspects to negotiate. Let’s look at the following example:
Here, you have a minimum amount fee and a set fee for declared value over $100 that can be negotiated. If you don’t like what your carrier is charging, or if they will not negotiate these terms, there’s always a third-party insurance company. Take U-Pic, for example. U-Pic claims to save you up to 85% on shipping insurance all while shipping with the same carrier. Let me repeat that: you ship with the same carrier for a fraction of the price.
LARGE PACKAGE SURCHARGE: A Large Package Surcharge will be applied when its length plus girth [(2 x width) + (2 x height)] combined exceeds 130 inches. Large Packages are subject to a minimum billable weight of 90 pounds. The set fee for large package surcharge is $57.50, but again, we have seen this negotiated down by 50%.
COLLECT ON DELIVERY (C.O.D): If you’re using UPS, the charge for basic C.O.D. service is $12.50. However, any value-added C.O.D. services used MUST be negotiated. You will notice, too, that the basic C.O. D. charge for FedEx has increased as of January 5, 2015.
Obviously your negotiating leverage will depend on your shipping volume and frequency details. You may get a better quote on some fees than others simply because of your shipping requirements. Some of these rates change frequently (Fuel Surcharge, for example). Talk to your carrier. Talk to other carriers. They can offer you delivery guarantees and price guarantees, but the only true guarantee is that you won’t get any discount if you don’t ask.
Stay tuned for our next post which will cover the exciting world of rate benchmarking!