Small businesses are the cornerstone of any economy, representing 90% of the employers. A vast amount of small package freight moves throughout the country on behalf of these companies, and in most cases, parcel carriers such as FedEx, UPS, and the Postal EMS are employed to ship and receive the goods.
Many companies make the mistake of dusting off contracts only at the one- or two-year renewal mark. Companies should instead review contracts early and often to ensure they receive the most competitive, market-driven shipping rates. When a contract no longer aligns with a company's business, re-negotiation is a must.
Here are some tips companies can use to master small package service contract negotiations and reduce transport costs by 10% - 50%.1) SEA FREIGHT, AIR FREIGHT OR COURIER - QUICK DECISION GUIDE
A typical rule of thumb is
If shipment is less than 40 Kilograms use a courier service (DHL, FedEx) that offers to pick from suppliers place, clear customs in your country and delivery to your doorsteps in about 3 days and its total shipment cost will be cheaper than air freight.
If shipment is over 40 Kilograms and below 250 Kilograms it is better to use indirect air freight consolidation service offered by freight forwarding agent. They will deliver to your customs port in about a week and you will need to custom clear using services of a customs broker.
If shipment is not needed urgently and over 2 cubic meters (more than 335 Kilograms) ship by sea as Less than Container Load Typical shipment time is about four weeks.
Don't assume to know the true meaning of the fine print. If you don't understand the terminology in the contract, seek consultation from the carrier's representative, or from a qualified freight consultant, to help decipher the language.
3) Be aware of "unless otherwise specified".
Most carrier service contracts offer incentives for outbound prepaid shipments only—unless otherwise noted. It is the shipper's responsibility to sift through the contract to see if it is, in fact, noted.
Shippers also need to be covered for inbound shipments. Many shippers have receiving departments that receive small package carrier deliveries every day. If a discount isn't applied when shipments are delivered to a receiving department, you could be overspending.
4) Ask for base discounts.
Base incentive discounts are usually expressed as a flat percentage discount for each individual package, and vary among multiple, specified weight ranges. These discounts aren't always included in contracts, so shippers must ask for them.
5) Obtain incentives for switching to a Paperless Office.
Utilise Internet Providers willing to provide you with a discount for switching to a paperless office (can be up to 40%). Online courier service providers are now encouraging loyalty by passing on cost savings from savings on paperless offices.
6) Preparation of Packaging.
Where ever possible, reduce the amount of waiting time your courier spends on your premises before collection or delivery. Ensure that your package is well packaged and ready-to-go. Reduce costs: Decrease the weight of the package.
7) Obtain Competitor Quotes.
Obtain multiple-quotes from alternative suppliers - It’s a game of number-crunching! Contact as many couriers as possible and compare like-for-like prices – go back to your original supplier and haggle! You can also arrange a meeting with you current courier service company and re-negotiate the existing contract.
8) Be sure the contract lists all the services your organization uses.
This helps ensure that services align with your needs, and are counted toward tier incentive discounts. These discounts are based on the total "weekly rolling average" revenue—the gross dollar volume tendered to the carrier each week—for eligible services only. And, you guessed it—only listed services are eligible.
9) Always employ "positive uniqueness."
In addition to mentioning that other carriers want your business, express to carriers the positive, attractive aspects of doing business with your organization. Carriers favor delivery density, air shipments, and heavier package pickups and deliveries. Be your own best advocate.
10) Pay attention to carrier rules tariffs, and know the surcharges.
The rules change often, so companies must be proactive. Check carrier web sites frequently to remain current and unaffected by increasing costs.
The carrier contract negotiation process can be confusing and intimidating. Taking control of the fine print, understanding the benefits of the various services, and handling the broad range of rate enhancements is a complex task. But paying close attention to the small print can mean big savings to a company's bottom line.