Shipping Rate Savings Must Knows
- With carriers continually raising shipping rates it is imperative to capitalize on all possible discounts, credits, refunds, rewards, and other benefits during contract negotiations.
- Identify your company’s Shipment Profile. Know what shipping rate reductions will have the greatest impact on your bottom line.
- At times for the greatest savings it is most effective to switch carriers, but the cost to change must achieve a satisfactory ROI (return on investment).
- If your volumes are not high consider shipping your packages through a Carrier Shipping Rate Reseller, rather than negotiating directly with the carrier.
Shipping Rate Savings Details
For many companies, particularly eCommerce businesses, small parcel shipping rates are a constantly growing expense. Additionally fewer and fewer customers are providing payment for shipping and handling costs, so these annual expenses are directly reducing your business profits. Because of these growing annual costs, it is imperative to capitalize on all possible refunds, credits, rewards, discounts, and other benefits offered by carriers such as FedEx and UPS. Use the below 4 key tactics to experience impactful shipping rate savings.
1) Negotiate Shipping Rate Discounts with Carrier(s)
The shipping rate discounts directly from carriers are heavily dependent on your annual expenses with each carrier, however each situation is unique. It is possible that someone with lower carrier expenses may have better rates than someone with a significantly higher expense.
Factors that may play a role in carrier shipping rate discounts received include, but are not limited to:
- Projected growth
- Demographics of region (ie small town vs large town)
- Current rates being received from competition (ie you are switching from UPS to FedEx)
- Negotiation skills
- Knowledge of your shipment demographics
- Knowledge of carrier benefits (know what to ask for)
- Current pressures the carrier is feeling to land new business (ie better rates to get you on board before quarter closes if their numbers aren’t looking good)
In order to receive the most impactful discounts, it is necessary for you to know your shipment profiles. Your shipment profiles are the characteristics and traits of your carrier shipping volumes.
Shipment Profile data may include:
- Volume of shipments per Weight and Volume
- Frequency that you are paying for the DIMENSIONAL WEIGHT vs Actual Weight of shipment
- Volume of packages to each Zone
- Frequently charged accessorial charges
- Frequency of packages you pay the minimum billable charge for
Identifying these factors allows you to identify and negotiate shipping rate discounts that will have the greatest positive impact on your costs and carrier rates. Become an expert on your Shipment Profile, and continually monitor it. Carrier contracts can be as simple or as complex as you require. If you want a discount on something there is a good chance that someone else is receiving a discount on that item already. Do not be afraid to ask for a discount on something in fear of feeling foolish, uneducated, or unreasonable.
2) Negotiate Additional Perks and Benefits with Carrier during Shipping Rate Contract Negotation
In addition to negotiating shipping rate discounts with your representative, you can also negotiate contract signing perks. These perks are onetime, or periodic, benefits that your company receives at a time specified within the contract.
Carriers may offer perks such as:
- Funds to purchase technology
- Funds to spend with carrier’s business partners
- Funds to spend on consulting services
- Advertising and marketing spend and/or opportuntites
- Much more
*These benefits come with some limited restrictions but generally they are easy to capitalize on and offer apparent benefit.
3) Switch Carriers to Realize Maximum Shipping Rate Savings
At times we have found it effective to switch from one carrier to another (UPS to FedEx and vice versa, for example) in order to achieve the greatest shipping rate savings. This is especially worthwhile if you have recently hit a significant carrier revenue increase and your current carrier is not offering significantly better discounts.
Often times carriers feel that they have you locked in as a customer and are not at risk of you going to a different carrier due to the costs, time, and inconvenience doing so requires of your business. Because of this your current carrier will offer minimal discount improvements as your volume and costs increase, compared to the rates that a competitor carrier will offer you. In certain instances it can be very cost effective to switch carriers to achieve better carrier costs, but you must consider the ROI (Return On Investment) of the costs to change carriers as it can be costly and disruptive.
4) Utilize a Shipping Rate Reseller for Discounted Rates with Lesser Volumes
Don’t have a direct carrier representative because your spend is not high enough? You may want to consider a 3rd Party Rate Reseller, rather than negotiating your own shipping rates directly. The 3rd Party Reseller acts as an agent to consolidate many smaller accounts together in order to achieve a greater discount from the carrier. The rates you receive will be cheaper than from the carrier directly, but the 3rd Party Reseller will still make a profit.
Do not underestimate the importance of evaluating your carrier shipping rates. With shipping costs continually rising, shippers must continually pressure providers for improved rates and additional benefits during negotiations. Take time to learn about and understand your shipping needs before negotiating rates. If carriers are not accommodating your needs, consider going to their competitors or 3rd party resellers for cost savings.
There are many opportunities for shipping rate savings with your small parcel carrier, are you maximizing your realized benefits?
Comment below with other helpful tips, or unique contract benefits you have negotiated.