The level of specificity built into the pricing models for carrier agreements is unparalleled. For example, there are 26,000 different ways to ship a package from the US to Canada, depending on the ship from and ship to locations, the service type and the add-on services selected. 26,000! Even the highest volume shippers will never use all 26,000, but knowing which of the 26,000 are used, the spend associated with each and the market appropriate rates gives you the advantage during the negotiation process.
Unfortunately, for most shippers, the level of specificity required to model pricing agreements correctly is lacking. In part, because of a knowledge gap. In part, because the tools used in the modeling process are limited to crafty vlookups and if-then functions in excel. There’s a better way. Betachon Shipping Solutions has the tools and experience to help you negotiate rockstar carrier contracts.
Overview
If you’ve been negotiating shipping contracts on your own, there’s a likelihood you aren’t getting the best service at the best price. Carriers sell shipping agreements that maximize profit and shift focus to value-add services and lanes that don’t apply to your shipping profile. Going back and forth with your carrier account executive, asking for deeper discounts doesn't help much in unlocking a reduction in spend.
To help shed some light, this whitepaper tackles what to say during the negotiation process, the challenges of contract negotiation and what mistakes to avoid during the process. Small tips to help you win.
It’s what you say, how you say it and when it’s said that matters most when negotiating your agreements. Betachon Shipping Solutions works in a capacity that best fits your business, interfacing directly with the carriers on your behalf, or consulting each move and interaction behind the scenes. Here are a few talking points that might be used as part of a successful negotiation.
What to say during the
negotiation process
“There’s been a lot of internal communication regarding international lanes. Transportation costs are significantly higher compared to domestic lanes. We’re considering consolidating single piece shipments, and would like your assistance in working this into our international pricing agreement."
“We have a new accounting manager on the team and her preferred carrier at her previous company is (insert a different carrier name here - e.g. FedEx, UPS). We opened an request for quotation (RFQ), and are coming to you as the incumbent carrier to open a discussion for a comparison on rates and service."
The bottom line is everything in shipping. Carriers respond to potential increases and decreases in revenue. Sticks and carrots. The two statements above exemplify this, and can be used as opening statements. Now, knowing your numbers, providing data, and the details to backup a successful ask is where the Betachon Shipping Solutions carrier agreement optimization consulting practice delivers true value.
Never enter a contract negotiation blind. Carriers often know more about a shipper’s data than the shipper. To have a competitive edge, shippers must fully grasp and understand the implications of terms on their carrier agreements and have the data to back up any claims.
Carrier account executives are trained to create the illusion that you are in control, but this structure is a strategic way for the carrier to make the final moves and leave with the upper hand. Remember, the carrier’s goal is to walk away with increased profit from the negotiation
NEVER give up your money-back guarantee on service failures in exchange for increased discounts. We have proven in many cases that the shipper will save more by claiming refunds on service failures than a few percentage increases in their discounts.
It’s no secret that the number of accessorial charges and their proportionate spend of total spend has increased over the years. Carriers intentionally make agreements complex to maximize profit. For example, unlocking a deeper discount on Ground for 1 to 5 lb packages for a zone 2 package doesn’t result in a lower net cost if the transportation charges for that shipment are assessed according to a minimum charge. If that sentence is not self-evident, then the pricing models are more complex than you realize. In contrast, understanding this requires an appreciation for the amount of computation required to pierce the veil of complexity in carrier agreements, and arcs back to the critical need of the modeling software built into Betachon Shipping Solutions. Carriers will offer shiny discounts, but it’s imperative to assess all charge types and related discounts in a way that unlocks the lowest net charge possible.
Challenges of negotiating
carrier contracts
Lacking tools
Years of engineering went into the Betachon Shipping Solutions carrier agreements modeling software, which compares multiple carriers and any number of agreements in a single analysis. A difference in list rates, discounts, minimums, surcharges, rebates and beyond is far too complex to model in spreadsheets.
Betachon Shipping Solutions loads each proposed carrier agreement into the modeling software, that shows the net cost of each cost component from the shipments recently billed to your shipping account. This side-by-side comparison is the only way to model carrier contracts effectively.
The carriers have built similar software, which computes projected profit based on details of a proposed agreement. In the case of Betachon Shipping Solutions, the computed number is projected savings compared to current spend. The modeling software built into Betachon Shipping Solutions, empowers the Betachon Shipping Solutions Auditing Team to close gaps and draw down overspend.
The Betachon Shipping Solutions Auditing Team analyzes your current agreement and showcases potential savings based off historical shipping data, current costs, industry averages, and key performance indicators.
Scarce competition
You likely have hundreds or even thousands of SKUs, but only a handful of carriers to consider for getting those goods to customers.
Each carrier has hub-and-spoke networks built in a strategically targeted way, that may or may not be the best fit for your business.
Cost and profitability are at the forefront of the building and maintaining these complex networks and the difference between them is immense, especially at the edges, like next flight service and international deliveries.
The best way to evaluate each is according to service and price.
Such a cross-carrier assessment necessitates a deep understanding of each carrier, the services and capabilities of that carrier, and the net cost of moving goods through that carrier network, considering all transportation charges, surcharges, and accessorial fees.
Secure the shipping rates you deserve and takes the guesswork out of carrier agreement negotiation. All the tools and resources you need to achieve a winning contract are available through Betachon Shipping Solutions.
Mistakes to avoid during
contract negotiation
Not knowing your shipping profile
“There’s been a lot of internal communication regarding international lanes. Transportation costs are significantly higher compared to domestic lanes. We’re considering consolidating single piece shipments, and would like your assistance in working this into our international pricing agreement."
Ignoring the fine print
“We have a new accounting manager on the team and her preferred carrier at her previous company is (insert a different carrier name here - e.g. FedEx, UPS). We opened an request for quotation (RFQ), and are coming to you as the incumbent carrier to open a discussion for a comparison on rates and service."
Planning to negotiate alone
Don’t rush into your negotiation without being confident you uncovered all areas of potential savings. Preparing for negotiation can’t be accomplished in a few minutes. It requires hours of analyzing the shipping profile to determine areas where you can lower shipping costs. If you think you’ve gotten as far as possible with your carriers, enlist the help of Betachon Shipping Solutions to take a deeper look. Having veterans on your team that knows the shipping industry will only help you get the most favorable rates on your carrier contract.
NEVER give up your money-back guarantee on service failures in exchange for increased discounts. We have proven in many cases that the shipper will save more by claiming refunds on service failures than a few percentage increases in their discounts.
Solid solutions for reducing
shipping costs
8Betachon Shipping Solutions has engineered thousands of shipping profiles and related carrier agreements. Spend less time in the weeds of carrier contracts and more time on your core business. With Betachon Shipping Solutions on your side, you’re sure to negotiate a carrier contract like a boss.
Businesses that move fast need shipping solutions that can keep up. Betachon Shipping Solutions, a parcel managed services platform, provides robust supply chain solutions that save companies money on FedEx, DHL and UPS invoice through shipment audit and recovery, lost and damaged claims management, transportation analytics and carrier agreement optimization.
