Online travel site Priceline.com has made a name for itself through its Priceline Negotiator marketing message, as seen in ads featuring William Shatner and Kaley Cuoco. But trying to get the cheapest flight or hotel isn’t the only time a negotiator comes in handy.
One of the most effective ways to lower shipping costs is by negotiating better rates with your carriers. Easier said than done and it's not simply a matter of just being “tough” with suppliers. Carriers have a distinct advantage over you as a customer when it comes to negotiating because they are almost always operating with more information. They know what market rates are for shippers like you, as well as the exact pricing levels they need to maintain a proper margin and keep their business profitable.
Shippers who are successfully negotiating with carriers have figured out how to gain and use this same information (i.e., the carrier’s costs and market pricing) to level the playing field and negotiate the best rates for themselves. This too is easier said than done, however.
The Changing and Complex Rate Marketplace
The impact of e-commerce and how it is influencing the small parcel industry has brought a lot of attention – and upward pressure – on shipping costs for businesses. Even the carriers themselves are still figuring out how to deal with the extreme growth in B2C deliveries, and it is reflected in their announced General Rate Increases (GRIs) for 2018.
Unfortunately, these types of increases only add to the information advantage carriers have when it comes to negotiating. Simply understanding the impact of annual GRIs is hard enough – modeling their impact over the course of a multi-year rate agreement is almost impossible.
Gain Some Perspective
Logistics decision makers work hard negotiating the best rates with carriers. But they are at a natural disadvantage because they only negotiate maybe once every few years. Carriers do it every day. To get the best rates, it can take working with an expert who can provide the information and data a company needs to negotiate in an informed way.
The truth is a lack of negotiating skills is not the main issue preventing shippers from getting their best possible rates. A dependable third-party expert has the data and information that shippers alone lack. And, they also understand the lesser-known details in every agreement that affect rates, which most companies overlook.
For example, market trends (like the overall strength of the economy or the rising cost of labor) affect carrier rates. An informed shipper must be aware and know how to use this information, or they’ll be at a disadvantage. Understanding the long-term influence of macroeconomic issues on rates and how to plan for them is difficult - but contracts are based on where the market is going, not where it is today.
Rules can also vary by carrier so reading any contract line by line is always necessary. A lot of unexpected charges may be listed in the details of rate agreements. Yet, few people other than an expert who is regularly reviewing different contracts can help a company understand all the fine points.
Using technology to model multiple pricing scenarios and compare carriers requires a great deal of effort on the part of shippers. A shipping expert can provide value simply by saving time during the negotiation process.
Being confident your company has competitive shipping rates is the goal of every small parcel negotiation. Smart shippers understand that access to market rate data and information is key to achieving this. Getting support from a third-party expert during this process shouldn’t be thought of as a sign of weakness. It’s a clever choice that eliminates the advantage carriers usually rely on, and the best way to ensure your shipping costs are the lowest they can be.