World-Class Strategies for Sourcing Global Parcel Rates and Contracts

Jun 23, 2014 2:15 PM  By

Rob-Martinez-headshot_MCMI will be presenting an ALL-NEW and EXCLUSIVE session at the Growing Global conference in Long Beach, CA on July 16.  The presentation, which is entitled Get It Delivered For Less: World-Class Strategies for Sourcing Global Parcel Transportation Rates & Contracts, provides advanced procurement strategies for shippers looking to reduce global parcel costs through contract negotiations.

Here’s a sneak-peek at what you’ll learn at this session:

Today’s global parcel agreements are more complex and conditional than ever.  In general, rate charts are multi-dimensional, based on service level, package weight and/or dimensions as well as regional zonal pairings (to/from).  Pricing can be based as discounts off published rate schedules, net rates, and/or package contents (i.e. documents versus non-documents).  The structure of incentives is often tiered and based on service levels and rolling revenue bands.  And of course, most carriers change pricing tariffs annually.

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But there are additional complexities.  The measure of weight can be listed in either Kilos or Pounds, and there are often huge rate jumps between increments.  Your rates are also affected by package characteristics, dozens of special handling charges, duties & taxes, commodity restrictions that vary by country, as well as important terms and conditions that vary from provider to provider.  Finally, today’s global parcel agreements can include constraining elements to minimize defection to alternative carriers, including revenue-based incentives, minimum volume requirements and even penalties for early contract termination.

Critical Steps to Global Parcel Procurement

Regardless of where you ship from/to, there are three steps to improve your chances of procuring best-in-class global parcel contracts: Research, Analyze, Negotiate.

Step 1:  Research

Where are you shipping?  What are the customs regulations and/or restrictions for each country?  What documentation is required?  Commercial or pro forma invoice, shipper’s export declaration, certificate of origin, NAFTA certificate of origin?  Each of the major carriers offers a variety of online tools to research destinations.

Research potential suppliers and enabling technologies.  The major global parcel carriers such as DHL, FedEx, United Parcel Service, TNT Express and others provide global delivery service, many delivery options, and value-added services including tools to manage documentation requirements and trade compliance.  Determine which carrier offers technology that best fits your requirements.  Items to consider:  shipment processing; international forms and shipping resources, customs documentation compliance and government regulations; duties and taxes estimates; shipment tracking; currency conversion; and reporting.

Step 2:  Analyze

Before stepping up to the negotiating table, shippers need to collect and analyze shipment detail to better understand usage, costs, accessorial charges and other variables.  Develop reports to understand current service usage, transit requirements, package characteristics including box dimensions, weight ranges, zonal distribution, residential/commercial mix, and other package metrics.  In addition, understand how your packages are currently impacted by minimum and dimensional charges and accessorial costs.  This detailed analysis gives shippers a priority list to focus on concessions that have the greatest cost savings impact.

Conduct benchmarks to determine what range of discounting is possible and how your rates compare with other shippers of similar size and/or package characteristics.  If you lack the ability to benchmark internally, there are a number of companies that can assist you in this important process.  Many third party market experts are willing to conduct an obligation-free, complimentary assessment of your current rates and terms to assess potential savings.

Be sure to evaluate total landed costs for all competing bids. Include in your comparisons all transportation and accessorial charges, fuel surcharges, destination add-on, brokerage and other charges.  This landed cost analysis offers additional value: It will help determine if you are appropriately recovering shipping charges from your international customers.

Step 3:  Negotiate

Once you’ve determined which carrier offers the services and tools to best handle your business, the next step is to negotiate pricing. Two additional steps are required to negotiate best-in-class global parcel contracts:  1. Develop a competitive bidding environment maximizing leverage; and 2. Preparation and strategies for the actual procurement process to negotiate discounts, accessorial concessions, and contract terms.

In closing, I encourage you to attend the Growing Global Conference in Long Beach, CA and attend my session – Get It Delivered For Less: World-Class Strategies for Sourcing Global Parcel Transportation Rates & Contracts – to learn the specifics regarding these advanced procurement strategies.  I hope to see you there!

Rob Martinez, DLP is President & CEO of Shipware LLC. He welcomes questions and comments, and can be reached at 858-879-2020858-879-2020 Ext 114 or rob@shipware.com.