In our previous blog articles, we’ve discussed why you should negotiate rates with your shipping carrier and even tips on preparing for negotiations. Now, we’ll discuss WHAT to negotiate. Parcel service fee negotiation is essential. You may hear some say fee XYZ can be negotiated or fee ABC cannot be negotiated. But the bottom line is this – you won’t know if you don’t ask. This is not a complete list of all negotiable FedEx and UPS value-added services, just a few that will significantly impact your transportation costs.
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DIMENSIONAL WEIGHT PRICING
Dimensional Weight Pricing (DIM weight) is applied to every package shipped. Ground, express, and international parcels are included. What is DIM?
For example, send a package that measures 25” long x 26” wide x 18” tall but weighs only 20 pounds. The dimensional weight would produce a billed weight of 85 pounds! But what if you negotiated a 166 DIM divisor instead of the current standard of 139?
Based on the DIM weight calculation – (25 x 26 x 18) / 166, you would be charged for 71 pounds (70.48 would be rounded to 71lbs). That reduces the amount of billed weight by 14 pounds.
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. This higher DIM divisor lowered the weight from 85lbs to 71lbs and not down to 45lbs.
RESIDENTIAL SURCHARGE
FedEx and UPS apply a residential delivery charge to ANY delivery to or pick-up request from a home location. Even if you are a business, but operate out of your home. One of our clients reduced this surcharge from the standard $6.55 express and $5.95 for ground to a 95% reduction. This may not seem significant, but this client was charged a residential surcharge over 1500 times in one week, over 15% of their total shipping cost.
Read more about UPS residential surcharges here.
DECLARED VALUE (Insurance)
Insurance is an area that has several aspects to negotiate. Let’s look at the following example:
Suppose you’re shipping $1,000 of training equipment for Jimmy Joe’s new bird dog puppy. Per UPS, the first $100 worth of the product is covered free of charge. So that means you still need to cover the remaining $900. The remaining $900 will be charged at $1.60 per $100.
Here, you have a minimum amount fee and a fixed fee for a 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 while shipping with the same carrier. Let me repeat: You send 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 a large package surcharge is $205 to $297.50, but again, we have seen this negotiated down by 90%.
COLLECT ON DELIVERY (COD)
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 frequently change (Fuel Surcharge, for example). Talk to your carrier. Talk to other carriers. They can offer you delivery and price guarantees, but the only genuine guarantee is that you won’t get any discount if you don’t ask.
NEED HELP WITH CONTRACT NEGOTIATION?
Parcel service fee negotiation is essential. All companies should negotiate new rates at least every two years or whenever shipping volume changes. Do not let the cost of transportation impact your bottom line. Our reporting can reveal shipping intelligence your company requires. The experts at Refund Retriever are here to help you learn more.
