When the rules change, successful coaches are flexible enough to alter their strategies and make game-changing adjustments that lead to wins. Shippers must be willing to adopt a similar mentality to minimize their costs when dealing with the myriad of complex carrier rules.

This was one of my prevailing thoughts after attending the recent PARCEL Forum in Chicago. Some of the takeaways included information about several new technologies on the horizon that have game-changing potential and how regional carriers can expect to play a bigger role.
When it comes to complex carrier rules, the Carrier Roundtable session provided some excellent insight from the carriers’ perspective (FedEx, UPS, USPS, Purolator and the regional carriers). One topic in particular piqued the interest of many shippers. The UPS/FedEx “duopoly” has made it clear to the shipping community at large that it does not want them working with third-party consultants because they prefer to “negotiate” directly with shippers. This is a very bold statement. Consulting firms have been successfully providing parcel negotiation services to shippers for more than 10 years.

A recent Morgan Stanley Transportation Industry report stated that more than 11% of all shippers use a consultant to help their negotiation processes. Morgan Stanley also reported that in the past six months, 12% of all shippers switched carriers, further demonstrating that there are, indeed, savings opportunities to be achieved with the carriers.

Shippers use third-party parcel negotiation consultants for the following reasons:
TECHNOLOGY: Consultants have developed sophisticated pricing model software that provides the essential information and analysis necessary to maximize the effectiveness of their negotiation with the carriers.
EXPERTISE: Most consultants’ personnel have come from the carriers’ pricing and sales organizations with many years of experience. As such, they know how the carriers develop pricing strategies.
INDUSTRY BENCHMARK: Consultants have developed massive databases to benchmark each customer to similarly sized shippers and similar shipping profiles, which is a very powerful tool during the negotiation process.
PROCESS: Consultants have developed a process that can deliver savings in 60-90 days. Most consultants are paid using a “gain share” model, which means they are highly motivated to produce the best savings results for the customer.
CONTRACT DEVELOPMENT: Carriers use very complex contracts, which are difficult for shippers to understand. In fact, one could argue that carriers don’t understand them either. Consultants can interpret the legalese and simplify contracts, which has a significant positive impact.

FedEx and UPS claim that they want to deal directly with their customers, reasoning that consultants don’t know much about the shipper’s business. I’ve got news for them: It’s the consultant’s responsibility to fully understand each customer’s business, both overall and from a “data perspective.” Consultants might not know a contact at a specific location, but they have an aggregate view of the flow of shipments and the characteristics that influence the total cost.

Small parcel shippers have accepted the fact that FedEx and UPS can set their price increases to meet their own balance sheet expectations. Carriers’ pricing strategies have become more aggressive with the demise of DHL’s domestic operations. New challenger brands include the likes of the USPS, parcel consolidators and regional carriers. With this said, small parcel shippers will need parcel consultant expertise more than ever.

I believe that it’s incumbent upon every shipper to take a stance with FedEx and UPS and determine if using consultants is in their best interests. After all, isn’t the customer still always right? As a new year approaches with anticipated rate increases, we must continually challenge this strategic move by FedEx and UPS to minimize the impact of RFQs and contract re-negotiations.
MICHAEL J. RYAN is Vice President-Sales/Marketing for GENCO Supply Chain Solutions-Transportation Logistics. Contact 708-224-1498 or ryanmj@genco.com.