A Look at Parcel Consulting Firms

Oct 22, 2008 10:36 PM  By

Have you ever considered using a parcel consulting firm to review your distribution expenditures and negotiate your carrier agreements? If not, there’s a good chance you are spending more on shipping than you should.

Going the parcel consulting route isn’t right for every business, of course. But here are some of the benefits they provide:

Expertise

Many companies lack sufficient staff expertise to deal with the complexity of transportation rate structures, accessorial fees, fuel surcharges and modal combinations. For most shippers, the experience of negotiating parcel agreements is limited to one or two contracts every one to three years.

Parcel consulting firms, on the other hand, negotiate dozens of programs annually. Many have extensive carrier backgrounds and offer unique “insider” insight to carrier pricing practices and guidelines.

For instance, consultants can benchmark carrier pricing against a peer group of other shippers with similar shipment characteristics and expenditures, often within your same industry. The result of the benchmark study is a comparison of your carrier contract ranked against best-in-class programs.

There are hundreds of pricing programs the carriers could offer you. Most shippers don’t have the best rate programs simply because they don’t know these programs exist.

Dedicated resources

Most distribution professionals don’t have time to carry out comprehensive distribution analysis and carrier negotiations. As a dedicated resource, the consultant will act on your behalf to collect and analyze data, meet with incumbent and potential carriers, document your requirements, prepare a procurement strategy, develop RFPs, evaluate bid responses, and negotiate and implement contracts. Apart from their expertise, this is the biggest advantage a consultant provides.

Access to information and analysis

Knowledge is essential in negotiations. As a rule, you should know more about your business than the carriers. But when it comes to shipping, the carriers have the upper hand because they capture detailed information through package characteristics–what you ship, recipient information, box sizes and weights, service levels, zones, commercial/residential mix and hundreds of other shipping metrics.

Most shippers have limited access to this information or don’t know how to evaluate it properly. Assuming you gain access to the data, the next challenge is filtering through distribution data to prepare for contract negotiations. Which fields are important? How do you use the information to know what to ask for in a negotiation?

Parcel consulting companies typically are equipped with sophisticated technologies for collecting and standardizing data as well as methodologies for comprehensive distribution analysis and bid evaluation. They can quickly sift through endless fields of shipping data to identify areas of opportunity for contract optimization and overall savings. And they can apply carrier pricing to a data sample to model the cost impact of each proposal to your actual distribution.

Carrier motivations

Another challenge to negotiating parcel agreements is that carriers are focused on margin improvement. Your carrier rep’s job is to sell your business at the highest rates possible. As a result, most carrier account managers do not extend their company’s best pricing.

How can a parcel consultant help? Carrier reps understand that consultants are privy to hundreds of negotiation outcomes, and are therefore aware of the range of discounts available to shippers.

And most consultants enjoy high-level relationships within the corporate offices of each of the carriers. Should the carrier’s local, district or regional sales resources not provide the responsiveness and pricing flexibility a shipper deserves, consultants can escalate the issue to corporate management for prompt and satisfactory resolution.

Rob Martinez is a partner at Navigo Consulting Group (www.navigoinc.com), which provides contract benchmarking, distribution analysis, and carrier negotiations.

To read the full article, check out the November issue of Multichannel Merchant magazine. Don’t have a subscription yet? Click here.