UPS Contracts: Changes to Know
UPS contracts changed in 2019. I would say some of the most notable impacts have been in some of the surcharges. So, in 2018, UPS took a massive increase in their over-max fee. That's when you're shipping very large packages, whether it be long or heavy. That fee went from $300 to $650 by the end of the year. This year that fee is still in effect. This is the case after having also taken a large peak surcharge during the holidays. If you ship heavy things or large things, that hurts. It's more than double the cost of what it was the year before. Added to that is around a 5% increase in the annual rates across the board with UPS, means your costs are going up. That's something you can't combat through the way you ship. It's more about managing the way that those impact your rates.
A rate impact analysis is something that is crucial from one year to the next. It allows you to understand how your cost can increase or decrease. This is even without making any operational changes to your shipping. This is what this means. You could ship the same number of packages, the same size packages all to the same location. Yet, your costs will still vary because of the way that the rates have changed. The impact analysis analyzes the new rates, the new surcharges, and your cost from the carrier. It takes them and applies them to your historical data. This is to understand the same things, same thing shipping to same places. It helps you understand how your costs will change from year to year.
Assess the Health of Your Contract
Assessing the health of your contract is understanding where you are now. That's one of the tips I mentioned in an article that I wrote about negotiating the best UPS and FedEx contracts. But what it is is understanding where you are now. The health of your contract is how you compare with shippers of similar size. This includes how you spend and shipping characteristics. So, if you are shipping something. And a company down the street, who is the same size company as you, ships to the same customer and is paying less. It means that you have some opportunity to improve your contract.
Logistic helps customers understand the health of their contract by analyzing. It includes a shipper profile made up of over 100 points in your shipping profile. This includes the surcharges you could apply and the service level you could ship on. This is along with your current rates for those services. What we want to understand is whether there is room to improve for a shipper your size. Or we want to know if you're doing amazing already. We'll let you know that your contract is healthy if you're at the top tier of a shipper of your size.
Manage the Negotiation Process
There's a tip for people who are looking to assess the health of their contract but are trying to lower cost. This is to manage the negotiation process. There is one key tip that I included in the article I recently wrote about how to negotiate your best contract. It is knowing what to ask for, how to ask for it, and when. The analogy I used is it's like telling a good joke. The punch line is everything, and the delivery is everything. So, you don't want to give that punch line up too soon.
The way that applies to negotiation is very similar. You want to know what concessions you're asking for within the negotiation. Even more important is when to ask for them. There's an appropriate time when you demand certain concessions in your contract. And there are other times when it's very easy to ask throughout the contract. So knowing that and the temperament of your rep to engage the negotiation is important. Negotiations affect the concessions that the carriers will make in your favor.