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Should I hire a consultant to negotiate my shipping contract?

Not necessarily.

Freight consultants add value by applying industry insight to a company’s unique shipping profile in order to optimize carrier discounts throughout the negotiation process. Interpreting parcel carrier tariffs can be as daunting as navigating the tax code, so consultants play a role similar to that of tax accountants. Hiring a professional with an inside perspective usually results in better discounts. But there’s a hitch.

In October 2009 UPS and FedEx announced they would no longer work with third-party consultants hired to negotiate for shippers. Shortly thereafter one of the bigger third party negotiators filed suit against both carriers, claiming colusion and price-fixing — a claim being investigated by the Dept of Justice at the time of this writing. The question we’re all asking is, “can they (FedEx, UPS) really do that?”

A little known reality is that in practice this anti-consultant policy is more guideline than law. Third parties like Direct-Recovery are still involved in the process, but that’s another discussion. The question at hand – is there a way to achieve better rates on my own? Here’s a simplified, mostly DIY approach:

1. Don’t marry your parcel carrier. Fidelity to spouse is good, but play the field with your carrier, even if you’d prefer not change. At the very least, appear to keep your options open, and even be slightly discontent with your provider.

2. Determine how competitive your current rates are. This is where a company like Direct-Recovery can advise, based on aggregate data of comparable shippers, just how you compare to industry averages. If there’s room to discount, put a number on it. 5%? 10%? Set a target.

3. Submit a Request For Proposal to selected carriers, indicating your desire to achieve overall rate reductions of your target established in step 2.

4. Don’t neglect the regional carriers. There are more companies than UPS and FedEx serving the US market, and many more on the international level. What’s more, many carriers interline with others to expand service territory. Evaluate your domestic and international shipping needs, and help keep the industry competitive. If US based, ask for a proposal from the US regional carriers such as:

  • Eastern Connection: services the northeast and mid-Atlantic
  • Lone Star Overnight: Texas and several contiguous states
  • OnTrac: West coast, Arizona, Nevada, Utah
  • Spee-Dee Delivery: ¬†Illinois and upper Midwest
  • US Cargo: Midwest and some east coast

5. Mind the accessorial fees. These vary considerably based in large part on a company’s internal shipping operations. While these may account for as much as 30% of a shipping bill, the good news is that many are within your control. Not fuel surcharges perhaps, but ¬†Dimensional Weight Adjustments, Saturday Delivery, Address Corrections, and many more can be remedied with operational changes. Sometimes these accessorials can be negotiation targets as well.

6. Compare contracts in real life. Rate proposals are complex and can be difficult to decypher. The best way to assess a contract proposal is to rerate your actual shipping history. Apply the new rates to the last 12 months of your shipping history to determine what, if any, savings may materialize. Direct-Recovery has a tool to do just that in the reporting interface.

7. Mix and match. If there are elements of a proposal you’d like to see in another, it seldom hurts to ask.

8. Don’t give up your right to claim for guaranteed service refunds. It doesn’t behoove you, or the parcel industry for that matter, to absolve the carriers of their service commitments.

That’s the simplified DIY approach. Direct-Recovery provides some of the rate analysis tools that may help in this process.

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