How to Negotiate Shipping Rates With UPS and FedEx

UPS and FedEx are two of the biggest shipping companies in the United States. According to Investopedia, the two companies ship more than 42 million packages and documents each business day. With e-commerce snowballing, shipping carriers take advantage of the demand and continually increase prices. In fact, over the past decade, the cost of the cheapest way to ship a parcel has risen by approximately 76 percent. With no way around shipping needs, many business owners think they have no choice but to pay the high prices.

However, you can take steps to keep your shipping costs down. The most important thing you can do is monitor invoices and renegotiate your contracts continuously. While these companies may be the experts when it comes to parcel shipping, and it can seem like they have the upper hand in negotiations, business owners have some leverage of their own.

Can You Negotiate Rates With UPS and FedEx?

When discussing UPS and FedEx, we usually talk about small parcel shipping – typically considered any package under 70 pounds. These companies are responsible for delivering a product to your customer, or the “last mile”.

If your business relies heavily on shipping, you’re probably no stranger to parcel contracts. Within this written agreement with UPS or FedEx, you will find the specific rates, surcharges, and conditions of small parcel shipping with those companies. To ensure you’re not overpaying, you need to know how to negotiate shipping rates with UPS and FedEx.

Every aspect of your shipping contracts can be discussed to ensure that you’re getting fair FedEx and UPS negotiated rates, and you can enter into renegotiations at any time. Not only is it possible to negotiate these contracts, but it’s also vital.

Rather than paying the standard published rates, businesses can secure special UPS or FedEx negotiated rates based on their specific shipping habits and needs.

Understanding Published Rates vs. Negotiated Rates

When it comes to shipping with UPS and FedEx, it’s important to understand that there are different pricing structures available. While published rates are available to everyone, UPS and FedEx rate negotiation is generally reserved for businesses with a fair amount of volume.

• Published Rates: These are the standard shipping rates available to the general public and are visible on the UPS and FedEx websites. They apply to all customers without a special agreement and are generally higher as they don’t consider specific business needs.
• Negotiated Rates: These customized rates are secured through direct negotiations with UPS or FedEx. Typically lower than published rates, they are tailored to the business’s shipping habits and needs, considering factors like shipping volume, frequency, package characteristics, destinations, and service levels.

How to Negotiate Shipping Rates With FedEx or UPS

The most important part of negotiations with UPS or FedEx is being prepared ahead of time. While the shipping industry is booming and may seem like a seller’s market right now, there is plenty of competition that plays in your favor. These large carriers will negotiate with you to find a mutual ground that benefits everyone.

By following these tips before and during negotiations, you’ll be able to come to terms that work for you.

1. Arm Yourself With Data

Whether you’re renegotiating a previous contract or looking to work with one of these couriers for the first time, you’ll want to come armed with plenty of data to plead your case. So, look through your records to see what you’re currently being charged, your shipping habits, and your highest expenses.

UPS or FedEx will have plenty of data to argue their side, so it’s essential to come prepared as well. The best way to do this is to run an audit on your current shipping usage. That way, you know your goals and what areas to focus on in negotiations.

2. Have a Game Plan

Don’t go into UPS or FedEx contract negotiations blind. For starters, you must take your time throughout the FedEx and UPS contract negotiation process. Running through data reports, shopping around for different carriers, and waiting for approvals during negotiations takes time. By planning ahead, you’ll be able to make sure you hit each step thoroughly.

You’ll likely run into confusing language or coding that you don’t understand. If you’re struggling to comprehend contract terms, you should consult an expert to ensure you have a decent chance at negotiating.

Once you collect all your data, you’ll want to use it to decide on your negotiation tactics. It’s crucial to understand what types of discounts are available through UPS or FedEx and what makes sense for your business based on your shipping data. For example, the FedEx volume discount helps you save more the more you ship.

3. Shop Around

One thing giving you the upper hand when negotiating with UPS or FedEx is the fact that you have options. Even if you don’t want to change carriers, you can use lower rates from competitors to help pressure FedEx or UPS for better rates.

In fact, you don’t have to limit your business to only one provider at all. Many companies push for lower rates by constantly changing their shipping carrier. You can even divide your business between the two. For example, UPS may have better rates for domestic deliveries, while FedEx is known for international shipping. There is no reason that you can’t mix and match for your specific needs.

4. Negotiate Everything

Everything on your UPS or FedEx contract is up for negotiations. Their representative may tell you something isn’t because they aim to make money for their business. It’s your job to fight for your case during FedEx and UPS contract negotiation, and everything is on the table.

• Tiers: Based on rolling averages of revenue or volume, you can reach different tier levels that offer additional discounts. You can use the data analytics you combed through to negotiate how the tiers are organized to play in your favor.
• Minimum Spend: UPS and FedEx will have a minimum package charge which is the lowest possible price to be billed per parcel, despite any applicable discounts. If the minimum spend is too high, your discounts can be rendered meaningless, so be sure to consider this number during negotiations.
• Surcharges: These fees often go unnoticed during the negotiation stage but can increase your shipping costs considerably. Potential surcharges may be related to hazardous materials, oversized packages, fuel index, address correction, or many others. Comb through your past data to see which surcharges continually end up on your invoices and try to negotiate discounts or have them waived entirely.
• DIM Pricing: Also known as dimensional weight pricing, DIM pricing is based on an estimated weight using the length, width, and height of the packages you’re sending. Depending on the dimensions of your packages and their actual weight, this can increase your shipping costs dramatically. Make sure you understand how it works when in contract negotiation with FedEx or UPS, especially if you frequently ship large but lightweight products. You can negotiate for a DIM divisor different from the standard if you’re repeatedly hit with DIM penalties.
• Bundling: Both UPS and FedEx offer additional services on top of delivery, such as warehousing, customer service, or outbound processes. If they offer multiple services that you’re looking for, you can use bundling to lower your UPS or FedEx negotiated rates. Make sure to do your research to ensure this is actually a cost-effective solution for your needs.
• Refunds: Millions of dollars of refunds from UPS and FedEx go unclaimed every year. Refunds are typically owed due to late deliveries, failed deliveries, or overcharges. But it’s your responsibility to claim these refunds, and UPS and FedEx can make the process difficult. During negotiations, ensure that your right to refunds is written clearly and you understand the required process for receiving them.
• Termination Clause: Many businesses think they’re locked into the current rates until the end of the contract. Remember that you can renegotiate at any time, but there may be a penalty written into your contract through a termination clause. Fight for no early termination penalties when you start to renegotiate or negotiate a new contract.

5. Don’t Lock Yourself In

It’s crucial to maintain flexibility in your shipping contracts. Always try to avoid contracts with restrictive terms, early termination fees, deferral penalties, or any other constraints that limit your ability to adapt to changing business needs.

For example, never waive your right to file for a Money-Back Service Guarantee or Guaranteed Service Refund – regardless of what the carrier promises.

In addition, avoid signing any addendum or agreement that locks you into a specific period and penalizes you for early termination.

6. Keep Renegotiations on the Table

With time, your business evolves, your shipping characteristics change, and the carrier marketplace fluctuates. It’s crucial to continually revisit parcel contract negotiations to prevent overpaying for one of your business’s most significant operating expenses.

Regularly monitoring your shipping data and staying informed about carrier updates or industry news can reveal changes that might impact your parcel spending and highlight new areas where you can secure better FedEx or UPS negotiated rates.

The Complexities of UPS and FedEx Contracts

If you don’t have a background in supply chain logistics or something similar, it can be extremely confusing to negotiate FedEx rates or UPS rates. The contracts with these carriers are legal documents filled with complicated terminology that most business owners don’t use on a daily basis. Plus, with contracts designed by UPS and FedEx, it’s no surprise that they’re organized to play in their favor.

Endless codes, confusing pricing, and hidden surcharges are hard to sift through. The contracts can even be up to 100 pages, making anyone’s head spin. Also, each carrier has a different format for their contracts, so it’s hard to compare pricing among competitors.

Despite how confusing these contracts are, you would be doing your business a huge disservice by not taking the time to understand them. If you can’t dedicate proper time and energy to deciphering shipping contracts, consider using a third party like P3 Cost Analysts to help you. With experts in the shipping industry helping renegotiate your contracts, you’ll be less likely to overpay.

UPS and FedEx Rate Negotiation with P3 Cost Analysts

It seems like the steps are endless when it comes to negotiating contracts with UPS or FedEx. Many business owners don’t have the workforce to dedicate someone to the continuous task of small parcel auditing and negotiations. What if you could have an expert in the shipping industry handle everything for you with zero upfront costs?

P3 Cost Analysts will do just that. We can save you weeks of time by handling negotiations for you while bringing you savings like we’ve done for many other companies before you. Most of our clients save 15 to 20 percent on shipping costs.

Our expert team consists of former UPS and FedEx employees, so they truly understand the ins and outs of parcel contracts with these companies. In addition, they have insight into the shipping industry, giving you the negotiating power to save tons of money each month. Chat with one of our P3 experts and have a free shipping consultation today.

Other Ways to Save on UPS and FedEx Shipping

At P3 Cost Analysts, we offer comprehensive Parcel Spend Management services designed to optimize your shipping costs and improve your bottom line. In addition to our expertise in how to negotiate UPS rates and FedEx rates, here are other effective strategies to save on shipping costs:

1. Ongoing Auditing

Continuous auditing of your shipping invoices ensures that carriers adhere to the negotiated rates and terms. By regularly reviewing invoices, you can identify discrepancies, such as overcharges or billing errors, and address them promptly to avoid unnecessary costs.

2. Prompt Refund Requests

Shipping carriers often owe refunds due to late deliveries, service failures, or overcharges. It’s crucial to proactively request these refunds within the allowed time frame to reclaim money that is rightfully yours. Ensuring timely claims can significantly reduce overall shipping expenses.

3. Market Benchmarking

Comparing your shipping rates and services against industry standards and competitors helps ensure you’re not overpaying. Regular market benchmarking allows you to stay competitive and leverage data to negotiate better rates with carriers.

4. Technology-Driven Efficiency

Utilizing advanced analytics and tracking tools can help identify trends and inefficiencies in your shipping processes. By leveraging technology, you can streamline operations, reduce wasteful spending, and achieve considerable cost savings.

Summing Up UPS and FedEx Negotiated Rates

The very first step towards coming out on top when negotiating shipping rates with FedEx or UPS is that you can, in fact, negotiate when creating these contracts. You don’t, and you shouldn’t, blindly accept the rates that they offer you right off the bat.

While these contracts can be extremely complicated to understand, if you take the time to learn how to navigate them, you’ll be able to save your business tons of money with discounted FedEx shipping or UPS negotiated rates.

When considering how to negotiate UPS rates or FedEx rates, the most important thing you can do is plan ahead and have a solid understanding of your shipping analytics. By knowing your needs and where you’ve been spending the most money on previous invoices, you’ll be armed with the information you need to create a contract that works for you.

If negotiating isn’t your strong suit or you simply don’t have the time, let P3 Cost Analysts handle FedEx and UPS contract negotiation for you. Contact us today.