In the current parcel market, demand heavily outweighs supply. The carriers are leveraging their temporary advantages as much as possible. So, is there really nothing to do but wait until things come back into balance?
Thankfully, no. It’s still a competitive market with plenty of alternatives you can leverage. The carrier you’re not using today can be your best friend in your next contract negotiation. But regardless of whether you want to switch, here are three proactive steps you can take to optimize your chance of success, even in the current seller’s market.
1. Everyone likes working with people or companies that make their jobs easier.
There’s a lot you can do to make your drivers and sales reps happy and create incentives for them to ensure your operational and pricing needs are met. My colleague, Paul Yaussy, recently published an article called “The Key to Success for the Carrier/Shipper Relationship,” in the July/August edition of PARCEL. Some of his underutilized practices for drivers might seem like small gestures, but they go a long way. Come negotiation time, having allies in the carrier operations department is surprisingly helpful. Proactive steps like ensuring packages are ready when your driver arrives, making it easy for your driver to access your pickup area and keeping it clean of debris, being flexible with your pickup window, and helping them keep their tight schedules and stay healthy by providing water on hot days all go a long way in establishing goodwill.
Carrier sales reps also have challenges you can simplify. Carriers have laid off salespeople, placing increased demands on remaining reps. As we come out of COVID, reps will likely add more travel time to an already historically busy workday. Like the drivers, reps have goals to meet. In addition to volume and revenue targets, they’re often measured on other, more nuanced administrative goals like completing a number of client visits per day (sometimes accompanied by their manager), delivering a certain number of business reviews each month, and pitching certain products. Making yourself available to help them hit these goals will build goodwill with your rep, provide you with valuable insights into your own shipping profile, and potentially expose additional ways to collaborate. And making anyone look good in front of their boss is something they will definitely remember come negotiation time.
2. Your shipping profile: Understand it and communicate it to strengthen your negotiating position.
You rely on your carrier reps for insight into the complex carrier pricing structures and increasing number of rate changes each year, but their heads might be spinning just as quickly as yours. They’re often granted limited insight into the reasoning behind pricing decisions, even for their own accounts, and rarely have access to the same data used by other departments. Similarly, their internal partners are relying on those same reps to offer insight into the needs of your account. Help them simplify at least half this process by proactively communicating what you have to offer and what you need. The better you are at telling your own parcel story, the easier it will be for your sales rep to communicate those details to their pricing department.
Provide packages per day, average weights, dimensions, service levels, commercial/residential, designation, etc. Put your story on paper. This becomes a business case your rep can hand to their pricing department. The more of YOUR story they can tell, the greater the impact you can have on your negotiation. In the absence of information, pricing departments must assume the worst to protect their employer. So, for example, if your residential customers each receive two packages per shipment, it’s important to communicate that; it practically doubles the carrier’s assumed delivery density, dramatically lowering the delivery costs for the carrier.
3. How do you know what the carriers want?
You know what you have; the key is linking that to what the carriers want. If the majority of the “What Carriers Want” list describes your shipping profile, congratulations on being a unicorn. But even if it doesn’t, highlight what you’ve got. These characteristics are almost universally valued:
- Shorter zones.
- Commercial deliveries.
- Multi-piece deliveries.
- Weights between 10 and 20 pounds.
- Dense and securely packaged products.
- Urban and suburban pickups and deliveries.
- Steady volume throughout the year, or at least off-peak spikes to help smooth network demand.
- Small- to medium-sized business (strong margins, tomorrow’s large businesses).
If you really want to go the extra mile to understand the carriers, listen to their quarterly earnings call. But, if you take this step, keep in mind that much of what you learn might be spun to show the carrier in the best possible light as they work to meet, beat, or set investor expectations. Also, many regional carriers and other good options are still privately held and may not offer the same insight into their operations.
Another excellent option is to work with third-party shipping experts, since they can provide you with an unbiased view of the carriers and how they operate. While your drivers and sales reps will often work very hard to do their best for you, they are ultimately employed by the carriers.
Thriving in the Current Environment
It’s true that carriers have rare advantages in the current environment, but things are not hopeless. Be proactive and take these steps to ensure a successful pricing negotiation:
1. Maintain a long-term focus as you build relationships with your drivers, operations contacts, and sales representatives.
2. Know who you are as a shipper and make sure you communicate that to your carrier reps.
3. Understand how your shipping profile matches what the carriers are looking for and highlight those strengths.
Adi Karamcheti is Consultant, Professional Services at Shipware, LLC, a San Diego-based parcel consulting firm that specializes in cost reduction and recovery services.
This article originally appeared in the September/October, 2021 issue of PARCEL.