Parcel - June 2008 - (Page 18)

operations NEGOTIATING CARRIER CONTRACTS Part 1 — Great rates, but not a great contract By Mike Williams Editor’s Note: This is the ﬁrst in a three-part series. Look for the second and third parts in our upcoming issues. I hear it all the time: “I have great rates from my parcel carrier.” But what I ﬁnd when I probe a little deeper is that most shippers have focused on only half of the equation. Getting great rates from your carrier is only half the battle. Most shippers pride themselves on having what they consider to be a “World Class” parcel contract. But what they actually have are World Class rates and a very poor or ineffective contractual agreement with their parcel carrier. Companies pull together large project teams to participate in the process of bidding their parcel business but will then leave it up to someone in Purchasing or Legal to ﬁnalize the contractual details. Both sides of the equation must be addressed to ensure your company is receiving top treatment from the parcel carriers. have negotiated great discounts on their ancillary charges in addition to great rates. But often times what the shipper actually has is little or no protection from the increase in the ancillary charge fees that are issued each year by the parcel carriers. A shipper may think they have negotiated a custom rate for a particular ancillary charge and expect that rate to be ﬁxed for the entire contract. But in reality, what they actually received in their contract was not a custom rate, but discount expressed as a percentage off the list rate for that particular ancillary charge. When ancillary charges are expressed as a percent off list, the shipper will receive the full impact of any annual increase that the carriers announce each January. Ancillary charges can account for up to 35% of the annual budget of a large parcel shipper. Shippers who limit the impact of annual increases to ancillary charges are operating in “World Class” territory. Constraints and Conditions Contracts can be ﬁled with constraints and conditions that work in favor of the parcel carrier and do little or nothing for Ancillary charges can account for up to 35% of the annual budget of a large parcel shipper. Shippers who limit the impact of annual increases to ancillary charges are operating in “World Class” territory. So what makes a parcel contract “World Class?” World Class parcel rates are pretty easy to recognize. The best rates are simply that: better rates than other companies of similar size, volume and package characteristics. But deﬁning “World Class” for contractual elements is a little more subjective. There are, however, three main areas that need to be considered to make sure your next contact is working for you, not against you. Carriers Increase Ancillary Charges, Too The ﬁrst area that is often overlooked in a parcel contract is ancillary charges. Most of the shippers I encounter believe they 18 May 2008 www.PARCELindustry.com http://www.PARCELindustry.com

Table of Contents Feed for the Digital Edition of Parcel - June 2008

Parcel - June 2008 Contents Editor's Note What Would Augello Say? Success Means Never Being Satisfied Moving from Manual to Automated Fulfillment Regional Carriers Move to the Forefront Understanding Warehouse Management Systems Negotiating Carrier Contracts It’s All About the Data! How Long Will The East-West Trade Imbalance Last? Educate the Shipper, or Fix the Software? Product Profile On the Mark New Products & Services Advertiser Index Wrap Up

Parcel - June 2008

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