Negotiation Tips: When Should You Renegotiate Your Shipping Contract? Author: Nathan Wheadon
March 08, 2021

Lots of shippers would benefit from some negotiation tips for getting better UPS and FedEx contracts.

We've helped countless companies optimize contracts and negotiate better rates with UPS and FedEx. One of the most important factors is when you make that ask. Timing is everything here.

Negotiation Tips Start with Timing

Customers often ask, for example, when a good time to renegotiate a contract or open up the contract would be. And in reality, anytime is the right time.

If the carriers implement a new surcharge that will have a huge impact on you, that's a good time to open up the contract. Even if you just signed a contract last month, when the carriers announce a change or a new surcharge that will impact you, you can go ahead and open up the contract again. There is never a bad time.

Look at What Impacts Your Costs

You always want to monitor what is impacting your cost. If your packaging or characteristics change, you need to understand the impact on your cost.

Coupled with the contract you have in place, you want to be able to go back to the carrier and negotiate either better or new terms.

We were negotiating for a customer late last year, right before the carriers announced a rate change to additional handling. We'd just finished negotiating, the customer signed the contract on a Friday, and the following week her carrier announced a change that would have a seven-figure impact on her business.

We went back the week after she signed the contract to renegotiate a better term for that additional handling piece.

The point of the story is that you can go back almost immediately to renegotiate terms if a change is going to have a negative impact on your business. In this case, the carrier was completely open to mitigating the costs for those additional handling fees.

In other words, when it comes to negotiation optimization, there is no time like the present.

Negotiation Tips: Know Your Normal Characteristics...

Another issue is staying on top of your shipping characteristics and monitoring when those change.

You should have at least a basic idea of:

  • Normal shipping characteristics
  • average weights
  • Average box sizes
  • Standard charges

From week to week and month to month, if your volume doesn’t change much, your costs shouldn't either. And if you see an increase in costs but your volume stayed the same, or if the number of packages is going up or your clusters are increasing, you need to know why that is.

...And Be Aware of Internal Changes

A lot of times there can be a disconnect between what marketing and sales does and how that translates to operations.

Marketing might come out with a new product or new packaging that is completely different than your normal characteristics are. This new package that goes out might be bigger or heavier. It could completely change your shipping characteristics so that your costs go through the roof.

You need to understand the impact of new product lines, product launches, packaging, and how they impact your costs and the characteristics of your average shipment when it goes out.

If you partner with someone like Lojistic, you can log onto our platform and check to see where your numbers are trending. You can see the characteristics and how things are impacting your costs. And you can use that information to talk to the carriers, for example, about tweaking the contract to mitigate the cost of a new product launch or any characteristic changes.

Optimization and Negotiation Are an Ongoing Concern

Another advantage that Lojistic provides is that, once a new contract is in place, we do a monthly rate audit. We check to ensure that the discounts that the customer signed for are actually the discounts that they're receiving.

We also do a DIM factor audit to ensure that there is a custom DIM factor in place. And we ensure that the customer is actually receiving the correct DIM factor so that the packages are being billed correctly based on the DIM factor.

negotiation tips renegotiate shipping contract

Further, at least once or twice a year we'll check to see if the contract that the customer is currently on, or the one that we helped them negotiate, is still good for the market based on the customer's characteristics.

If those characteristics have changed or if the market has shifted we'll tell the customer that. We’ll tell them to point out that the market has shifted and that carriers are offering X instead of Y percentage discount now. And we'll help them try to tweak the contract based on those market shifts.

If you want more negotiation tips or information on leveraging Lojistic's negotiation services for your business, click here to get in touch with us today!

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