According to the U.S. Small Business Administration, small businesses represent 99.7 percent of all U.S. employers. Small business means small freight. Specifically, it means parcel freight. Parcel shipping is the most common type of shipping for both residential and business customers in the U.S. Unlike LTL shipments which are usually wrapped pallets of goods, parcel shipments are typically individually boxed or wrapped packages that weigh less than 70 pounds and may measure 130 combined inches along its two longest sides.
Small (and not so small) businesses that ship parcel packages will most often negotiate a contract with a parcel company and receive discounted rates for their parcel shipments. These discounts will vary based on the quantity of parcel shipments that are both sent and received each day or week. Most of the larger carriers use boilerplate calculations and standardized agreements to determine what type of discount the customer will receive. A custom parcel agreement means that your business will receive a customized, one-off, agreement with rates and incentives designed to meet your particular needs.
When negotiating standard or custom parcel agreements, here are some things to consider, tips to use, and pitfalls to avoid:
- Use a third party software platform instead of the big carrier tools.
Most of the big carriers use proprietary software platforms that allow clients to log in and price out shipments. While convenient and necessary in this day and age, it’s a bit of smoke and mirror tactics. They’re, in essence, letting you choose prices only they offer. You as the consumer don’t have a way to know whether or not you’re getting the best parcel rate available amongst multiple carriers. You are better off using a 3PL (Third party Logistics) software tool that will look at rates across multiple carriers, not just one.
- It’s what’s not in your agreement that’s hurting you.
Your carrier rep might tell you that they can’t move on pickup times, or they’re not authorized to offer base incentive discounts. They can and will, but they won’t unless you ask, insist, or let them know you are asking because a competitor has offered. The rep’s job is to keep your account at the highest possible profit margin, so don’t let your rep (or the free golf or concert tickets) sway you from getting the discounts you deserve.
- Know your freight classification rating.
Your carrier uses a freight classification rating system to determine what rates you’ll receive. The system is based on four characteristics:
- Density: The weight per cubic foot.
- Freight Stowability: The length and width based on carrier mode rules.
- Ease of Handling: Evaluation of the care involved in transporting.
- Liability: This includes the freight price per pound, susceptibility to theft, liability to damage, breakability and perishability.
Understanding what your rating is ahead of negotiation will arm you to receive the best possible discounts.
- Beware the small charges.
In much the same way telephone companies stack your phone bill with charges, fees, and surcharges, so will carriers. The devil is in the details, so partnering with a consulting company who understands and will investigate and evaluate the charges unique to your freight profile might mean a few more percentage points in discounts for you.
- Consult with an expert.
While it may seem common sense, understanding and negotiating parcel agreements is a complicated process. Hiring and utilizing the services of a professional who understands the in’s and out’s of parcel could mean the difference in thousands of dollars of weekly savings.
For more information on custom parcel agreements, third party software programs, or leveraging multiple freight services for increased discounting, contact an Amware rep today, or click to download a free 30-day trial of industry leading 3PL software; AMRATE, now!