scene. The prominent consultants
are unlikely to accept customers that
spend less than $250,000 a year for
parcel services, and some set the bar
as high as $500,000 to $1 million.
Be prepared
Consultants say it is vital for their
customers to keep abreast of their
contracts, especially those that were
signed two years ago when times
were better. Shippers that seek to
renegotiate their contracts may risk
the loss of their existing discounts,
but they would not be subject to
penalties or any legal action,
according to consultants. Many
shippers don’t know they can ask
for contract modifications in midstream to secure lower rates or
avoid the loss of discounts should
volumes fall below previously negotiated levels, consultants say.
“My advice is to not just sit in a
contract. Be proactive,” says Kahl of
Tranzact.
In difficult economic times, carriers may be more flexible in renegotiating contracts to accommodate
reduced volumes in order to keep
the business they already have, consultants say. With shipping activity
down and carriers still needing to
fill their planes and trucks, FedEx,
UPS, and the U.S. Postal Service will
fight tooth and nail to win new
accounts and keep existing ones.
“The word has come down from on
high: ‘Don’t come back and tell us
you lost a bid or customer because
of price,’” says Hempstead.
Even DHL Express’s Jan. 30 exit
from the U.S. market has done little
to tilt the balance of power away
from the buyer. “FedEx and UPS are
very keen to compete as if DHL was
still around,” says Satish Jindel,
president of SJ Consulting, a
Pittsburgh-based consultant.
Consultants say they and their
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customers are best served by putting themselves in the carriers’ shoes both during
negotiations and throughout the contract’s
life. By better understanding the carrier’s
mindset and objectives, they say, shippers
not only gain bargaining leverage but also
build goodwill that can pay off if future
market conditions compel the shipper to
renegotiate existing terms. “The reason a
shipper may get special rates is not because
[it is] a better negotiator. It’s because [that
shipper is] more aware of the characteristics
of the carrier,” says Jindel.
Rich Corrado, who joined AFMS in 2008
as chief operating officer following a long
and high-profile career in the parcel field,
says his firm analyzes a customer’s shipping
and spending activity in much the same
way a carrier would. “The way we view the
client data is similar to the way the carrier
would view it,” he says.
Corrado says although a consultant can
add considerable value, its presence
shouldn’t be a signal to the customer that
the consultant will do all the lifting. The
most successful parcel customers are those
that “understand their own shipping profiles. They understand their product distribution by zones, and they understand their
mix of high-value and low-value products.”
Adds Jindel, “Those that get the best
deals have as detailed an understanding of
the characteristics of their shipping as their
carrier does.”
Consultants add that shippers can avoid
accessorial charges by being more disciplined
in their processes and paperwork. At a recent
industry conference, Paul Herron, FedEx
Express’s vice president, postal transportation and customer engineering, said one out
of four domestic air shipments required an
address correction for delivery. Hempstead
of Hempstead Consulting estimates that carriers levy a $10 fee for making an address
correction and directing the courier to the
proper location. “Shippers can do a better job
of verifying addresses, and it’s something
they can do without a consultant,” he says.
For the many tasks parcel shippers are
unwilling and unable to tackle, consultants
stand at the ready. In a time when austerity
and cost cutting are in vogue, consultants feel
good about their competitive position.
“There’s no better business to be in than one
that saves people money,” says Corrado.
