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For ecommerce companies, shipping small parcels to customers and managing small parcel contracting weighs heavy on them. The cost to ship small parcels rises on an annual basis. Over the past few years, UPS and FedEx increased costs of about 5% each year, varying by delivery zone and weight. In fact, during the past 12 months there have been about 10 rate and surcharge changes.
Managing these small parcel shipping costs are critical because they directly impact a business’s bottom and, though not obvious to customers, directly impacts them by through prices they pay for products.
So what can you do about your small parcel contracting? Don’t miss the opportunity review your contracts. Many companies simply just assume that they should only review contracts at renewal time. This would be mistake one. Just as carriers change pricing a few times a year, ecommerce companies can, and should, review contracts just as many times to make sure they receive the most competitive shipping rates. Also, as part of your contract, the rates you were quoted can change at any time, unless you negotiate.
Small parcel contracting can be complicated. For example, with at least 200 different fees that FedEx and UPS can charge, it’s difficult for shippers to understand what they are being charged. Also, as part of your contact, shippers are permitted to change rates at any time.
One especially troubling category of fees that you’ll need to pay attention to when negotiating small parcel contracting is accessorial fees, or fees for services beyond regular pick-up. These fees can include address corrections, surcharges based on delivery areas, large package surcharges, and something called “overmax,” a fee charged for weights of 150 pounds or more. Overmax fees have skyrocketed in the past few years almost 675% — to an average of $850 for an individual package. Making up the largest percentage of the total freight cost in small parcel shipping, as high as 50% of total small parcel cost, accessorial fees change often and quickly.
As shippers, you can’t control carrier rate increases, but you can control your small parcel contracting. The solution is a three step approach:
1. Analysis: Thoroughly understanding carrier contracts, including what you’re being charged and what you want to be charged, and determining if you’re being overcharged.
2. Strategy: Selecting a single or multiple shipping providers based on specific needs and prices.
3. Execution: Making sure contracts are optimized.
Prepare yourself for parcel contract negotiations or re-negotiations by doing your research, knowing what you need and knowing what’s possible. Start with a contract analysis and you’ll be on your way to optimizing your carrier contracts, lower shipping spend and increase profits.
Our expert contract analysis, combined with unmatched benchmarking and forward-thinking long-term strategies ensure you successful rate negotiations.
Gain insight, and overcome hidden costs, through our analysis of all accessorial fees that the Carriers may charge after delivery to verify final, accurate shipping costs.