E-commerce is a very competitive industry. One of the elements that can make or break your edge over your competition and increase your profits is your shipping costs.
Having a parcel contract that ensures you pay the best prices and don't lose your rights is crucial.
This comprehensive guide will walk you through the essentials of parcel contracts, key negotiation strategies, and insider tips to help you get the best possible rates from your carriers.
A parcel contract is a formal agreement between a company and a carrier that outlines specific rates, terms, and conditions for shipping services.
It typically includes negotiated discounts, surcharges, and service commitments tailored to the shipper's specific needs and volume requirements.
While you don't need a parcel contract if your business has low shipping volumes, it can become increasingly valuable as your shipping volume grows. If you're a high-volume shipper, a well-negotiated parcel contract can mean significant cost savings and improved service from your carrier.
Here are some of the advantages of having a parcel contract:
For businesses with higher shipping volumes, negotiating a parcel contract becomes more and more beneficial. As your volume grows, so does your negotiating power.
The exact volume at which a parcel contract becomes advantageous can vary depending on factors such as your shipping patterns, the carriers you're working with, and your industry.
Parcel contracts are complex documents that cover many aspects of the shipping relationship. Here are the key components you'll typically find:
Parcel contract negotiation doesn’t have to be a hassle. With our tips, you’ll be able to get significant savings and improved service. In turn, it can help you lower the shipping fees you pass to your customer. Here are ten proven strategies to help you secure the best possible deal:
Before you start negotiating, conduct a thorough analysis of your shipping data. Understand your
Compare your existing rates to industry standards and those of shippers of similar size. Tools like Buster Fetcher's Report can provide valuable insight into where you stand and where there's room for improvement.
Having a general idea of what companies with similar shipping needs are paying can really help you in negotiations.
While headline discounts are important, they don't tell the whole story. Pay attention to minimums, dimensional weight factors, and accessorial fees.
You can use our dimensional weight calculator to see how carrier volumetric weight factor compare.
A contract with lower base discounts but more favorable terms in these areas may actually save you more.
Your business objective is likely to grow over time. Don't let a long-term contract hold you back. Yes, longer contracts often offer better rates, but they can limit your flexibility.
Consider negotiating annual rate caps and performance clauses that allow for renegotiation if service levels drop. This approach balances long-term savings with the ability to adapt to changing needs.
Don't put all your eggs in one basket. Maintain relationships with multiple carriers and let them know you're considering alternatives. This competition can lead to better deals and more flexible terms.
Carriers are businesses with their own goals and constraints. Research their recent financial performance, market strategies, and capacity issues. This knowledge will help you tailor your approach and find mutually beneficial solutions.
Accessorial fees can add up quickly, and before you know it, all your savings from discounted basic rates are gone. Identify the fees that affect you the most, and negotiate caps or waivers on those fees.
Consider bundling some accessorials into your base rates for simpler billing and potentially lower overall costs.
One size doesn't fit all when it comes to parcel contracts. Work with your carrier to create custom rate schedules or zone-based pricing to match your specific shipping patterns. This approach can yield significant savings over the standard rate structure.
Include performance-based incentives in your contract. For example, you can negotiate additional discounts or rebates for meeting certain volume thresholds or for processing a high percentage of shipments electronically.
While cost is critical, service quality is equally important. Negotiate strong on-time delivery guarantees and clear remedies for service failures. Consider asking for dedicated customer support or priority handling during peak seasons.
It's also worth having a tool like Buster Fetcher to make sure you don't miss packages that are delivered late.
Negotiating your parcel contract may seem time-consuming and complex, but it's worth it. Using our strategies, you can secure a contract that significantly reduces your shipping costs and provides you with high service levels.
Remember, negotiation is an ongoing process. Review your contract performance regularly, stay informed about market changes, and be prepared to renegotiate as your business needs evolve.
Are you ready to optimize your shipping costs? Start by analyzing your current shipping data and identifying areas for improvement.
While parcel contracts are crucial for businesses shipping smaller packages, it's important to understand how they compare to other types of shipping agreements. Let's explore the key differences between shipping contracts, freight contracts, and parcel contracts:
Shipping Contracts:
Freight Contracts:
Parcel Contracts: