BY BRENDEN RUSSELL
NAVIGATING CARRIER CONTRACTS POSTCOVID-19 AND THE E-COMMERCE BOOM
The pandemic has changed much of how we do business, including contract negotiation. Here are some of the important questions to ask as you navigate the new normal.
he past year has certainly tested supply chains and brought them to their breaking point. With a 44% YOY increase in e-commerce spend in 2020 , carriers and shippers alike had to shift resources to account for the ever-growing B2C segments of their business. US average daily volumes for FedEx Express/Ground and UPS saw an average eight percent and 13% YOY increase respectively (see Figure A), but also jumped more than 22% in at least one quarter for each carrier during their fiscal 2020 year. So, it makes sense that both FedEx and UPS began revaluating their bottom line in Q2 2020, utilizing language that indicated they would have to increase revenues to keep up with the investments they had to make in their supply chains to withstand the large demand growth. Each carrier instituted peak residential surcharges that heavily impacted large retailers. They also created different ways of measuring volume baselines, assessing fees,
40 PARCELindustry.com MAY-JUNE 2021
and put new restrictions on what they would pick up. The dust is now settling after a tough peak season, and many shippers are wondering how they can better prepare for unforeseen fees and thresholds again. There’s no doubt that many will turn to carrier relationships this spring to try and lay out more favorable pricing and language into their contracts, but many also do not know where to start. Peak Activity Is a Great Starting Place Updating contracts for 2021 and beyond seems like a daunting task, especially since the year proved that all the best planning can go out the window in a split second. However, there are strategic contract components you can focus on to help lower your cost per package and increase the ability to budget for the years to come. Start by addressing peak in the contract: define what peak season dates are, how fees will be assessed, and potential dis-
PARCEL May/June 2021