The general rate increases that just went into effect from FedEx and UPS are not the only reason companies should consider renegotiating their small parcel contracts. Neither is how both carriers have now made their costly demand surcharges open-ended.
Taken altogether, this means most shippers like you are facing at least a 6.9% average increase and the continuation of other surcharges ON TOP of last year’s base rates. There’s no avoiding that 2023 is shaping up to be an expensive year for parcel shippers.
Do you remember the point in the pandemic when everyone realized how important the supply chain is to our daily lives? Well, here’s another chance for supply chain logistics to save the day. . . this time, it has to do with preserving your company’s margins and ensuring it remains profitable during some tough market conditions that may be around for a while.
An easy first step for small businesses is parcel contract negotiation with FedEx and UPS. Lower shipping rates and the savings that can result from better contracts drop straight to the bottom line.
So, what’s going on in the market that makes renegotiating your small parcel rate contracts a priority, and how will doing so help your company overcome some problems that you’re not alone in dealing with?
Cost-Cutting Mode
The economy might be in a recession or heading into one very soon. The bottom line during a recession is that companies produce and sell less, which leads to other negative consequences like job cuts and higher unemployment. Recessions create problems that perpetuate themselves until the cycle is broken and business picks up again.
Lowering your small parcel shipping costs by renegotiating your contracts allows your company to cut costs without reducing employee headcount. The savings can be used to smooth over rough financial patches and keep valuable employees on board while maintaining the necessary profit margins. Hiring has been tough the past few years, so companies should do whatever they can to keep good employees around for when the economy picks up again.
Fewer Capital Investments
Another common reaction among companies to a slowing economy is to delay or cut back on investments in the business. Making matters worse is that fast-rising interest rates have increased borrowing costs for businesses, making it harder to find working capital. Whether it’s to purchase equipment or add new technology, companies must invest to move their business forward regardless of market conditions.
Lowering small parcel shipping costs leaves more money available to make the necessary investments in your business. If you do this right now, you’ll be seizing a great opportunity that your competitors might not be taking advantage of. Increasing capital and investment during a downturn gives you a chance to create more separation between your company and all the rest when business improves.
The Opportunity Is Now
There’s never a bad time for small parcel contract negotiation rate agreements, but 2023 may be a make-or-break opportunity for your company. It’s taking larger margins on your part just to break even from last year. But with business volumes down, that is even harder to achieve.
Here’s one more reason that now is the time to renegotiate your small parcel contracts. The carriers have lost much of their leverage regarding pricing, so the advantage is with shippers like you. This is a big change from the past few years. The tough economy is impacting the carriers, too, so use the current market outlook as a way to reduce your shipping costs.
Talk to TransImpact.com for a no-obligation analysis of what your new and better rate contracts with FedEx and UPS can look like. We’ll tell you what your rates could be and how much you’ll save in 2023.