The current economic situation has and will continue to impact shippers in many ways. Company shareholders continue to demand better results and stronger dividends. In this economy management has found that when looking for ways to meet these requests it is often more realistic to cut costs than to put the entire burden on increasing sales. Some of the ways to achieve these cost cutting goals are: ensure you have a parcel agreement in place that address the current needs of your company, address ancillary charges and solutions and make sure you have proper carrier representation.

Analyze your current parcel agreement

Analyzing and understanding a parcel agreement can be a difficult task. If you think current parcel agreements are complex imagine what they will look like as carrier’s service offerings continue to increase and they get more creative with incentives. Make sure you take the time to fully understand the content of the agreement you are signing. 

Two key things make up a parcel agreement: contractual elements and rates. Most parcel agreements contain revenue and volume commitments and often contain language about cost per package requirements. It is easy to be impressed by seemingly great rates if you haven’t done your homework and don’t understand the conditions and/or commitments that may be a part of your parcel agreement. For example, do you know how the minimum charges will affect your proposed rates? Are all the relevant service levels included? 

It is imperative that you do the research and understand your shipping patterns. If you do not have the time or resources to gather the analytics you might want to consider outsourcing this function to a third party.

Ancillary Charges

Companies that are trying to cut costs can do so by identifying ancillary charges and eliminating back-end surcharges that impact their bottom line. These charges can account for up to 35% of a company’s annual parcel shipping budget.

One option would be to consider using available technology that validates addresses and offers alternatives when issues are found. Many third party software vendors offer these products. This software can also tell you if addresses on your mailing list are likely to incur a residential surcharge with a carrier.

You might also consider using a third party to evaluate the performance of your carrier. These vendors typically analyze multiple data points and not only retrieve service guarantees, but validate the various surcharges applied by the carriers. How your customers perceive your company can be directly impacted by the performance of your parcel carrier. Imagine what you think when you receive a late or damaged package, or worse, when a shipment you are expecting is lost.

The bottom line is that the impact of surcharges continues to increase exponentially and the carriers are not going to do away with them. You must be proactive and eliminate the issues that are causing these charges whenever possible.

Carrier representative involvement

First let me say that many parcel carrier reps do an excellent job and have years of relevant experience. We also know that in most industries the people that perform well get promoted. In the parcel industry the size of the sales forces coupled with the changing marketing directions of the shipping companies often makes it feel as if you have been put on a sales rep merry-go-round.

If you have a seasoned, engaged sales rep you know they can be an invaluable resource. If you feel your sales rep is not delivering what you need there are a few things you can do to address the problem. First, don’t rely solely on your sales rep. Engage both sales and operations managers as early in your carrier relationship as possible. These managers have usually developed stronger internal networks and can help speed requests during the negotiation process and beyond. Do not ever hesitate to escalate an issue that is not being addressed to your sales rep’s manager. You are paying them to handle your issues. Secondly, don’t rely on voice mail in your communications. An email gives you an electronic trail and can help you keep track of issues and resolve problems no matter what level of employee you are dealing with. 

Remember, those shareholders who are pressuring you are also holding the carriers accountable. The carriers need to increase sales as much as anyone else and that is a leverage point you can use to your benefit.

As you focus on these concerns, remember that there are third parties with years of experience in the parcel industry who can assist with these processes and serve as a necessary mediator in an industry with a limited number of real competitors. These consultants typically work with companies whose annual net parcel spend exceeds a quarter of a million dollars. If you decide your company could benefit from the expertise of a consultant, make sure you partner with one that is not fee based and only benefits from the measurable improvements they provide to your company’s bottom line. 

Chris Burns is a Managing Partner at First Flight Solutions, LLC, a spend management group with a focus in parcel rate negotiation and process improvements. For more information, e-mail Chris, call 888-787-3335x501 or visit