Every logistics manager knows the importance of their carrier relationships. A lot is riding on your carrier choices, like protecting your goods, budget, on-time delivery performance, and customer satisfaction.
Regarding parcel contract negotiation, many logistics professionals take pride in being the “hero” and negotiating what they feel are the best shipping terms and rates. However, it’s a mistake to discount the idea of having a third-party consultant assist with your small parcel agreements and rates. The market information, technology, and data some experts have access to can significantly affect the rates your company ends up with.
The Value of a Consultant During a Parcel Contract Negotiation
Because they deal with parcel negotiations daily, carriers know their way around a contract. After all, their contracts are developed under their terms, and their company’s success depends on how well they can negotiate. On the other hand, shippers don’t have nearly the same amount of experience with parcel contracts. The important thing, however, is that negotiating skill comparisons are not the issue. Getting the upper hand is about who has access to the most accurate and relevant information, and in 99.99% of negotiations, that is the carrier.
So, companies that negotiate alone are at a clear disadvantage. But, using an outside expert is an effective tactic to level the playing field with carriers. There are several ways a consultant can provide value during the negotiation process.
Market Rates
Every company wants competitive rates to ensure it’s not overpaying for shipping. However, shippers have no knowledge of where market prices are on their own. A third-party expert who sees a lot of contracts does, however. This information advantage is invaluable when it comes to knowing how far you can push a carrier during negotiations.
Market Trends
Market trends will affect your contract negotiations, too. But unless you regularly invest time watching and anticipating what’s going to happen in the market, you will be at a disadvantage. For example, the annual GRI announcements always affect companies’ small parcel rates, but understanding exactly how is difficult. Planning for long-term and macro influences is even more difficult. Yet contracts are based on where the industry is going, not where it is today. The future is impossible for most companies to forecast on their own.
Cost of Doing Business
While it is essential to know the going rates, it is just as important to know the carriers’ costs to service your business. Since your company has its own routes and volumes, competitors’ rates are only part of the equation. A carrier’s costs matter in pricing models and their strategy. An expert who understands carriers’ operating costs and pricing strategies can further guide you on what you should be getting from your negotiations.
From your perspective, lower rates with the best service are the ultimate goal of a small parcel contract negotiation. A parcel advisor can give you access to key information and put you in a better position for your negotiations. Remember, getting a good contract is not all about negotiation skills. Obtaining the necessary data and market information is the best way to get the competitive rates you need.