CONTRIBUTION BY SHAUN ROTHWELL – FOUNDER & CEO OF IDRIVE LOGISTICS
“I’ve already negotiated great rates”
Everyone thinks they’ve already negotiated the best possible shipping rates. To be bold, they are wrong. The same way Cam Newton was wrong when he spent most of Super Bowl 50 on his back, thanks to Von Miller and the incredible Denver Broncos defense. The dangers of the “I’ve already won” mentality can blind-side the best of us. Whether it’s a competitive football game or negotiating your agreement with FedEx or UPS, complacency stunts growth, kills progress and—often times—moves us backwards.
An Evolving Playbook for Positive Yardage.
Whether you’re filing an addendum to your carrier agreement to mitigate a rate increase or issuing a well-contemplated RFP to renew a carrier service agreement, every contract can be improved in one way or another. To use a football analogy, your current contract merely establishes a line-of-scrimmage. Your goal is to gain positive yardage and the carrier’s goal is to catch you for a loss. It doesn’t matter if you’re on the goal-line with best-in-class pricing or starting from your own 10 yard-line. That’s simply the starting point, and it’s up to you to execute a play that moves you forward.
Even Tom Brady Needs an Experienced Play Caller
You may indeed have a great contract and be a skilled negotiator, but even the most skilled, in-house negotiators only exercise once every 2-3 years. Small parcel experts, who deal with contracts on a daily basis, bring unparalleled perspective that will undoubtedly find holes in your agreement. This may result from varying perspectives. First, small parcel agreement experts maintain a 360-degree view of the small parcel market as well as available solutions based on given shipping practices and characteristics. Second, and more importantly, is the perspective of knowing how carriers view customers. This means knowing how they analyze customers’ shipping characteristics (cost modeling) to determine pricing and yield management strategies that maximize margin on that client. We’ll call this the carriers’ “blitzing strategy.”
Carriers Mask Their Blitz Packages
Carriers will try to lure you with discounts only to use provisions on the back-end of your agreement that negate a portion of the discounts being offered. Moreover, carriers invest substantially in training their sales force to create the perception that each client has the best rates for their size, industry and geography. Seriously—raise your hand if your sales rep has told you at one point, “Wow. You are getting the lowest rates I’ve seen and I’ve been doing this for 20 years.” He may be telling you the truth. They just might be the lowest rates he has ever seen, but he doesn’t know what he doesn’t know. Take it from a former member of the elite corporate pricing group at UPS—“You’d be surprised at what your sales rep doesn’t know and the types of pricing information he is deliberately shielded from by corporate higher-ups.”
Calling an Audible
In-depth knowledge of cost modeling provides comprehensive insight that will ultimately counter the carriers’ blitz packages. By gaining this knowledge and putting it to use, you will stretch beyond the lures of a shiny discount to understand the package-by-package details of your entire parcel spend and devise a strategy to compress it holistically.
Following this playbook will guarantee steady down-field progress and convert your “great” carrier agreement into a meaningful revenue stream for your company.