SHOULD YOU RENEGOTIATE YOUR CARRIER CONTRACT NOW?
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BY TIM SAILOR
iven the current landscape facing shippers, it has become increasingly important for shippers to recognize the new normal and a future with “perpetual peak” surcharges. This environment has presented significant challenges for CFOs and logistic managers trying to forecast shipping costs and budgets. It has become virtually impossible to know your company’s true shipping costs when the carriers apply arbitrary new charges and make them immediately effective. There are several important actions shippers need to take in 2021 to combat these issues. Shippers should begin by conducting a thorough review of their current carrier agreements. If your carrier agreement was written and implemented several years ago, does it reflect the current surge of new charges the carriers are imposing in 2021? How do shippers really know if they have a best-in-class agreement? As we have emphasized for many years, contract terms and conditions can be much more important than rate discounts in controlling your overall transportation costs. And, while most shippers have many concessions in their agreements that are favorable, do these have the same impact in 2021? This is particularly true for “peak season” surcharges. While shippers may have contractual concessions for historical peak surcharge timelines, these concessions may have little or no impact on new surcharges or the rapid rise of current tariff increases to charges like additional handling, oversize, residential charges, or increased volumes.
22 PARCELindustry.com JULY-AUGUST 2021
Not only are the carriers applying “peak season” surcharges during the entire year, but they are also trying to apply volume constraints on many shippers. The carriers are now trying to tie additional charges to seasonal volume, but they are also trying to impose capacity limits on the number of packages they will service in the Q4. Given these new circumstances, shippers should look to their agreements to see if they are protected from these new carrier practices. The second but equally important area may be contractual language to protect shippers from being penalized by growing and increasing their revenues and accompanying shipment volumes. Do you know how much these charges are impacting your shipping expenditures? The first thing you need to do is conduct a thorough data analysis to see exactly where your shipping dollars are going and your overall average cost per shipment. Pull down this data by month and pay particularly close attention to all the new invoice line items. This is especially important for your fourth-quarter shipping as the carriers dramatically increase these costs during what was the “traditional peak season.” Renegotiating your current agreement will not be an easy task. Typically, the carrier reps will tell you that you might jeopardize your current concessions and may not reduce your overall costs. They will also tell you that their companies are emphasizing margins over growth and do not really want to handle your business, particularly if you have shipments that DIM, require additional handling, are oversized or residential, or your volume is heavily seasonal. It is ironic to think that the carriers had been “losing” money on your account while providing service for years.
