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Small package agreements and negotiations are incredibly complex and require detailed planning in order to optimize results. Below is a list of critical items to consider in any negotiation:

1. Know What’s Important to Your Organization

Really consider what your organization needs to achieve from a service, cost and brand perspective. Different groups have difference goals, so check with sales, customer service, executive management and the operations team top make sure the direction is clear. If one group wants to halve transit time and another wants massive cost reductions, you might need to have some internal discussions before heading to market.

2. Have your Analytics Down

Your existing carrier(s) know your shipping characteristics backwards and forwards, so make sure detailed analytics are done on your side to enable a more level-playing field and a more powerful negotiation. You must know the positive and negative aspects of your shipping profile to determine a strategy for achieving your desired outcome.

3. Carefully Consider Carriers

This can be a simple or complex. If you are open to regional players like Ontrac, SpeeDee, LSO, Lasership and others, including regionals can be a great way to drive competitive pricing and even service improvement. If you are sticking specifically to UPS and FedEx, be sure not to wear a carrier out if you aren’t open to the idea of a change – it can backfire in the long run. Conversely, if you’ve been with one carrier for a long time and are open minded to switching, it makes sense to bring the other carrier in and see what they have to offer. You may be pleasantly surprised.  And remember, if you bring a regional in, make sure you can still hit any volume tiers with FedEx and UPS.

4. Understand your Package Sizes

Large and unusual package sizes have been under increasing price and size limit pressure for years with no end in sight. They’ve also been subject to extra increases during peak season shipping. Make sure your box sizes are as small as they can be to meet your needs and keep a close eye on changing box size surcharges. What isn’t charged a fee today may receive a hefty fee tomorrow.

5. Get the Timing Right

Unless an agreement or surcharge is expiring in a serious and unavoidable way, it’s generally not a good idea to negotiate rates going into peak season. FedEx and UPS are busy reviewing and rolling out rate increases during peak, so there is more focus on increasing rates, not decreasing them. Additionally, the holiday season moves quickly with short work weeks and employee vacation days around the holidays. This can lead to slow negotiations that can be fraught with stress if trying to meet an end of year deadline. Also, carriers will often restrict new volume during peak, so its best to avoid the holiday season altogether. It’s best to plan well ahead of any negotiation and allow several months to complete the process.

6. Consider Automation Ramifications

A good practice is to make sure your automation solutions will support not only the carriers you are currently using, but also those you would seriously consider using. Having options on who you can ship with gives piece of mind in an emergency and much more leverage for negotiations.

7. Set Goals & Strategize

Know where you would like to end up at the end of the process, understand your most important items to achieve out of your list and come up with a compelling way to explain this to your carrier rep. Its critical that you are able to convey why its important to get where you need to go and how to justify it.

8. Stick to Your Agenda

You will have your goals in a negotiation and the carriers will have theirs. Remember point #7 and do not get distracted with package studies, automation dollars, warehouse analyses or anything else that deviates from your plan.

9. Check the Fine Print

When you get the final agreement for signature, be sure that the pricing and terms you and your carrier rep have agreed to are actually reflected in the agreement. Carefully check to see how long terms are in place for things like surcharges and again make sure you understand when these items change. Surcharges can be 30% or more of total small parcel costs, so its key to know what is place and when they expire. Also check for penalty language – in terms of minimum volumes to achieve target discounts, peak season requirements (min or max) and also plain old penalty language related to shifting business to other carriers.

10. Be Prepared to Pivot

Even as you finalize your negotiation, be prepared to make future changes as needed. In current times rates change more than once a year and can come in the form of fuel surcharge changes, new surcharges, surcharge restructuring, peak season charges and more. Pay close attention to new rate announcements and take the time to determine the specific impact to your organization. If its significant, it’s possible you may need to address a new change directly with the carrier, shift business elsewhere or take other action to keep up with the market and your business needs.