Parcel - February 2008 - (Page 10) feature NEGOTIATING TERMS It could make or break your budget By Timothy Sailor On December 31, 2007, UPS, FedEx and DHL all passed along the highest general rate increases in eight years. This 6.9% raise came on the heels of record setting increases in 2007. For many shippers, the story in 2007 wasn’t about the historically high tariff increases; it was the changes that the carriers made to their terms and conditions. For the first time, UPS, FedEx and DHL no longer discounted the residential add-on fee. They also eliminated the Oversize 1 and 2 rules and implemented a 194 dim factor for ground shipments. These changes were not revenue neutral, and they increased costs for a significant number of large shippers. The impact of these fees affected many shippers more than the general rate increases. Many miss the days when you could look at a carrier rate sheet and know the exact cost of your shipment. It is especially difficult for shippers trying to accurately charge back or recoup shipping costs. Today’s shipment charges are made up of many different components, including list rates, discounts, accessorial charges and many other re-rating vehicles. There is no longer any rate transparency when auditing shipments for accuracy. The carriers’ terms and conditions continue to contribute a larger portion of shipping costs than any tariff increases. The Importance of Terms It is increasingly vital that shippers focus more time negotiating contract terms as well as rates. Most carrier contracts are written by the carriers to benefit the carriers. Contracts have become highly conditional, and shippers don’t always know what applies to their shipping costs. For too long, shippers have focused their negotiations on tariff discounts and incentives. This should be just the starting point in your carrier negotiations. Once you have obtained the best up-front discounts, move on to contract concessions, as up to 30% of total shipment costs are due to add-on fees. Shippers who fail to concentrate on these expenditures miss out on substantial savings. Most of these add-on charges are derived from the carrier service guide. The way to exempt or reduce these charges is through negotiating contract terms that are more beneficial than the standard terms. 10 February 2008 www.PARCELindustry.com http://www.PARCELindustry.com
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