Learning to dance with a partner can be challenging at best. Little did I know, the season of my life teaching country-swing lessons would frame future professional insights… It took a bit of time to acquaint myself and build rapport with the wide-eyed person staring back at me. I quickly realized the key to a successful dance lesson was communication; I needed to clearly communicate my intent to talk them through each step, while confidently reciprocating a look that said, “let’s go.” After all, I was the two-step professional.
In many ways, negotiating your shipping rates is a similar experience. Businesses approach these conversations with their carrier representative apprehensively because the carriers seem to have all the answers. The contract negotiation process is an eye-opening experience to be sure, but the key elements that must be present for an effective process are confidence and COMMUNICATION.
Effective communication requires all interested parties to be open and forthcoming with information. Simply put; share. As shippers know, communication with the carriers isn’t always effective, but it is imperative that you communicate your company’s business needs with the carrier. Early in your carrier relationship, ask your representative to walk you through your contract’s rates and terms. This does not suggest that you limit your optimization efforts to that time period of review, but it does provide a window in which any reasonable pricing concession by the carrier should be efficiently considered and implemented.
Regardless of when your carrier-recommended negotiation window is, or even if you choose your own window, there is one tactic you can expect–DELAY! This carrier-imposed tactic results in higher revenues for them and more struggles for you. These delays may unfold as:
- Vacations – the carrier representative or their director
- Last-minute offers – the “but wait,” value-added attempt
- Goal confusion – the carrier misunderstanding your shipper-driven goals
- Pricing-team stall – the offer is lost in translation with the elusive pricing team
- Passim proposals – the back and forth game of proposals and revisions
- Effective Date Adjustments – the urgent need to push contract effective dates, due to system issues
- Excessive meetings – the meeting to: better understand why you’re ready for negotiations, brief value-added services, review carrier proposals, deliver updated proposal presentations and more
The situations I mentioned above are only a few of the common delay tactics shippers face today. These delay tactics can cost your company big. One can see why shippers experience months of back-and-forth during a contract-negotiation project; essentially, this two-step IS money leaving your bottom line and moving straight to your carriers.
Stall-Tactic Consequence: $1-Million Shipper’s Perspective = $16,667 loss/month or $555 loss/day
As a shipper, attempt to work with the carrier when scheduling negotiations; this act of goodwill will help you move your negotiation along. At the same time, it’s important to confidently stick to your project timelines; holding the carrier representative accountable for moving the negotiation process along is critical to keep your business moving forward. After all, this is business, and there are a few carriers that hold their customers to the same standards of accountability (drop-off/pick-up times and payment terms).
Two-Step (contract negotiation) Tips:
- Politely decline all meeting requests until the carrier has a formal proposal to bring with them.
- Simulate the expected savings of your proposed carrier’s contract–this will give you an advantage. Too many shippers rely on the carrier representative to interpret the carrier pricing team’s rates and terms. The carrier representative is meant to serve you as a carrier customer; they’re not there to help you interpret complex service guides, rate tables, volume discount tiers, and mounds of shipping data to determine estimated savings. Be your own advocate.
- Ask your carrier representative for a savings commitment, especially if your shipping costs have remained fairly consistent.
- During your final negotiation phase, stay focused on how your service guide aligns with contract components such as your base discounts, earned/volume performance discount, dimensional weight pricing, minimum charges and et cetera. Just as you feel the communication with your carrier is solid they increase the contract negotiation tempo. The combination of contract possibilities is immense; a quick commitment could lock you into a not-so-favorable contract.
Expect to dance a bit when looking to balance the challenge of time, money and customer expectations within your contract negotiations. The key is to find a parcel expert with industry knowledge and benchmarking bandwidth. The best parcel partners will evaluate your unique shipping profile and equip you with THE playbook to successful contract negotiation. With a free, 60-day trial you can develop a parcel partnership with VeriShip–benchmark your parcel data and parcel contract among more than a trillion data points.