Parcel - June 2008 - (Page 19)

the shipper at all. Many times a shipper will rush through the contractual process in an effort to get the newly negotiated rates in place and start realizing the savings as quickly as possible. At the encouragement of the carrier, the shipper uses or “accepts” the carrier’s boiler plate contract to speed up the process. While this process is understandable (getting a custom contract approved by the legal team at a parcel carrier is not a quick process) often times it is not worth it due to the fact that carriers typically load a contract with requirements that tip the scales in their favor. One major constraint that can signiﬁcantly impact a shipper is volume commitments. Parcel carriers frequently add volume commitments to a contract with the reassurance to the shipper that it is “no big deal” or it “has to be done this way.” While the carrier may be telling you that the volume commitments should be easy to achieve, the commitments are usually by service and are based on the shipper’s package volume at the time the contract is signed. Minor changes in a shipper’s business strategy can give the carrier the option on whether they want to continue to provide services. Volume commitments are often accompanied by cost per package commitments. Sometimes the dollar amounts are expressed in terms of the carrier’s list rates, making it very difﬁcult for a shipper to determine if they are complying with the commitment or not. Most carriers will tell you that volume commitments are meant to prevent a shipper from moving part of their business to a competitor and the carrier getting stuck holding the bag, having to continue to honor the rates. But there are much better ways to structure a contract that will protect both the carrier and the shipper from unexpected shifts in shipping proﬁle. pay? The carrier and shipper should meet on common ground and outline consistent payment terms that work for both parties. Dissecting a parcel contract can be a complicated process. And as parcel carriers continue to expand their service offerings, contracts will only become more complex. Shippers must understand how the structure and content of a parcel contract are impacting their parcel network. Remember: getting great rates is only half the bat- tle. The shipper who focuses as much effort on the contract process as they do negotiating rates will separate themselves from the pack and emerge with a true “World Class” parcel contract. Mike Williams is Vice President of Consulting Services at Green Mountain Consulting. For an analysis of your parcel network, email Mike at mike@gmcps. com, call 901-507-9331 or visit www.greenmountainconsulting.com. ■ Equal Terms This is an area that always bafﬂes me. Shippers continually sign up for short payment terms of seven to 15 days. Conceptually, I don’t have a problem with it. Terms are important for the parcel carriers and sometimes it can be a sticking point to get the deal done. But shippers need to make sure that all the payment terms in a contract are the same. Payment terms for rebates that are due to the shipper for volume incentives or service calculations should match the payment terms for carrier invoicing. Does it make sense that the shipper has to pay the carrier within 15 days, but when the carrier owes the shipper money, the carrier gets to take 45 days to www.PARCELindustry.com May 2008 19 http://www.greenmountainconsulting.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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