Recently, UPS has taken a hardline position on contract optimization and negotiation.
We’ve heard about shippers going to UPS to negotiate their contracts and UPS taking a hard stance on not negotiating.
They’re actually increasing some large customers rates. They’re pulling their contracts and saying that they can't afford to do that anymore. And they’re giving them new contracts with 30-day clauses and other changes. Some of those customers took the increases, and some went to FedEx instead.
Since then, though, we've seen that UPS is willing to negotiate on a few different factors. It really boils down to the profitability of the account in UPS's eyes.
There is some nuance there. Depending on what you're asking for, UPS can make revisions. And we've seen them make revisions over the last year without much pushback. But we've also seen UPS say that they wouldn’t negotiate some contracts. And those customers actually brought in FedEx instead.
In other words, UPS is willing to negotiate and see where they can make revisions to help customers out. But they're not as willing to do that as they have been in the past.
Options for UPS Contract Optimization
Let's play out a scenario. You ship with UPS and you tell them that you want to improve or optimize your contract. If they refuse, you’ll have to look at your options.
The first step is to ensure that you understand what it you're asking for, and understanding what it is you're shipping.
You need to know the full characteristics and the impact of everything that you're doing on your end. Then you can go back to UPS and say, "I see an increase in this area. Is there something you can do?" And the more specific you are about what you're asking for, the better they can help you.
If you just say, "I need a better contract," they'll probably say there's nothing that they can do. But if you lay out a plan and say you want them to re-examine certain factors, they might be more receptive. It's really about being collaborative, which seems to help with UPS specifically right now.
That combination of being specific in what you request and being open to collaboration is the best way forward, at least according to what we’re seeing right now.
Specific Characteristics That Can Help with UPS Contract Optimization
Also, there are some specific characteristics that are more appealing to UPS today.
Residential discounts, for example, are hard to come by these days because they’re dealing with so many eCommerce shipments. The residential side, as well as ground shipments, are going through the roof.
If you have air packages, that might get a better response. The same goes for commercial air and ground packages.
Dense packages, or smaller and heavier packages, are better. And that's always the case with either carrier whenever you're negotiating. If you're shipping nuts and bolts, for example, you'll probably do well.
SurePost, which is also on the residential side, is less flexible. That’s not to say that they won't help you if you're a residential shipper, but those are not necessarily the customers that they're looking to either hold onto or convert from a competitor right now.
When is the Best Time to Negotiate a New Contract?
If you’re a shipper with some of those less appealing characteristics, you might be wondering if it would be better to approach UPS for a potential optimization now, or if they’ll take less of a hardline approach in the future.
But if your costs have gone through the roof because your business doubled or tripled because of the pandemic, it’s a good time to negotiate a new contract. Anytime there is a huge change in your characteristics, volume, or production, you need to make sure you understand the impact.
If any changes need to be made or you think changes need to be made, that’s when you want to tap the carrier on the shoulder and say that you need help. Most of the time they're willing to help on the contract side and the operations side. There are a lot of things that both carriers will do to help on the operational side to help cut some costs.
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