How to Negotiate Better UPS and FedEx Shipping Rates

Aaron Stahl / Small Parcel / August 10, 2022

UPS and FedEx are two of the biggest shipping companies in the United States. According to Investopedia, the two companies ship more than 42 million packages and documents each business day. And in a post-covid world, the shipping industry is only continuing to grow.

With demand increasing, rates are rising as well. As a result, 2022 saw some of the highest price increases in recent years, and many business owners think they have no choice but to pay the big bucks.

However, you can take steps to keep your shipping costs down. The most important thing you can do is monitor invoices and renegotiate your contracts continuously. While these companies may be the experts when it comes to parcel shipping, and it can seem like they have the upper hand in negotiations, business owners have some leverage of their own.

Can UPS and FedEx Contracts Be Negotiated?

Every aspect of your shipping contracts can be discussed to ensure that you’re getting fair FedEx and UPS negotiated rates, plus you can enter into renegotiations at any time. Not only is it possible to negotiate these contracts, but it’s also vital. Businesses can negotiate special rates with UPS or FedEx based on their specific shipping habits and needs.

With UPS and FedEx, you’ll most likely be dealing with small parcel shipping, typically considered any packages under 70 pounds. These companies are responsible for delivering a product to your customer, or the “last mile.” If your business relies heavily on shipping, you’re probably no stranger to parcel contracts. Within this written agreement with UPS or FedEx, you will find the specific rates, surcharges, and conditions of small parcel shipping with those companies.

It’s crucial to continually revisit parcel contract negotiations to prevent overpaying for one of your business’s most significant operating expenses. One of the most daunting parts of FedEx and UPS contract negotiation is how complicated and confusing the contracts can be. Still, with some preparation, you can better understand how to negotiate with these shipping giants.

The Complexities of UPS and FedEx Contracts

If you don’t have a background in supply chain logistics or something similar, contracts with these large shipping carriers may confuse you. They’re legal documents filled with complicated terminology that most business owners don’t use on a daily basis. Plus, with contracts designed by UPS and FedEx, it’s no surprise that they’re organized to play in their favor.

Endless codes, confusing pricing, and hidden surcharges are hard to sift through. The contracts can even be up to 100 pages, making anyone’s head spin. Also, each carrier has a different format for their contracts, so it’s hard to compare pricing among competitors.

Despite how confusing these contracts are, you would be doing your business a huge disservice by not taking the time to understand them. If you can’t dedicate proper time and energy to deciphering shipping contracts, consider using a third party like P3 Cost Analysts to help you. With experts in the shipping industry helping renegotiate your contracts, you’ll be less likely to overpay.

How to Negotiate Shipping Rates With FedEx or UPS

The most important part of negotiations with UPS or FedEx is being prepared ahead of time. While the shipping industry is booming and may seem like a seller’s market right now, there is plenty of competition that plays in your favor. These large carriers will negotiate with you to find a mutual ground that benefits everyone. By following these tips before and during negotiations, you’ll be able to come to terms that work for you.

1. Arm Yourself With Data

Whether you’re renegotiating a previous contract or looking to work with one of these couriers for the first time, you’ll want to come armed with plenty of data to plead your case. So look through your records to see what you’re currently being charged, your shipping habits, and your highest expenses.

UPS or FedEx will have plenty of data to argue their side, so it’s essential to come prepared as well. The best way to do this is to run an audit on your current shipping usage. That way, you know your goals and what areas to focus on in negotiations.

2. Have a Game Plan

Don’t go into UPS or FedEx contract negotiations blind. For starters, you must take your time throughout the FedEx and UPS contract negotiation process. Running through data reports, shopping around to different carriers, and waiting for approvals during negotiations takes time. By planning ahead, you’ll be able to make sure you hit each step thoroughly.

You’ll likely run into confusing language or coding that you don’t understand. If you’re struggling to comprehend contract terms, you should consult an expert to ensure you have a decent chance at negotiating.

Once you collect all your data, you’ll want to use it to decide on your negotiation tactics. It’s crucial to understand what types of discounts are available through UPS or FedEx and that make sense for your business based on your shipping data. For example, there’s the FedEx volume discount that helps you save more the more you ship.

3. Shop Around

One thing giving you the upper hand when negotiating with UPS or FedEx is the fact that you have options. Even if you don’t want to change carriers, you can use lower rates from competitors to help pressure FedEx or UPS for better rates.

In fact, you don’t have to limit your business to only one provider at all. Many companies push for lower rates by constantly changing their shipping carrier. You can even divide your business between the two. For example, UPS may have better rates for domestic deliveries, while FedEx is known for international shipping. There is no reason that you can’t mix and match for your specific needs.

4. Negotiate Everything

Everything on your UPS or FedEx contract is up for negotiations. Their representative may tell you something isn’t because they aim to make money for their business. It’s your job to fight for your case during FedEx and UPS contract negotiation, and everything is on the table.

  • Tiers: Based on rolling averages of revenue or volume, you can reach different tier levels that offer additional discounts. You can use the data analytics you combed through to negotiate how the tiers are organized to play in your favor.
  • Minimum spend: UPS and FedEx will have a minimum package charge which is the lowest possible price to be billed per parcel, despite any applicable discounts. If the minimum spend is too high, your discounts can be rendered meaningless, so be sure to consider this number during negotiations.
  • Surcharges: These fees often go unnoticed during the negotiation stage but can increase your shipping costs considerably. Potential surcharges may be related to hazardous materials, oversized packages, fuel index, address correction, or many others. Comb through your past data to see which surcharges continually end up on your invoices and try to negotiate discounts or have them waived entirely.
  • DIM pricing: Also known as dimensional weight pricing, DIM pricing is based on an estimated weight using the length, width, and height of the packages you’re sending. Depending on the dimensions of your packages and their actual weight, this can increase your shipping costs dramatically. Make sure you understand how it works when in contract negotiation with FedEx or UPS, especially if you frequently ship large but lightweight products. You can negotiate for a DIM divisor different from the standard if you’re repeatedly hit with DIM penalties.
  • Bundling: Both UPS and FedEx offer additional services on top of delivery, such as warehousing, customer service, or outbound processes. If they offer multiple services that you’re looking for, you can use bundling to lower your UPS of FedEx negotiated rates. Make sure to do your research to ensure this is actually a cost-effective solution for your needs.
  • Refunds: Millions of dollars of refunds from UPS and FedEx go unclaimed every year. Refunds are typically owed due to late deliveries, failed deliveries, or overcharges. But it’s your responsibility to claim these refunds, and UPS and FedEx can make the process difficult. During negotiations, ensure that your right to refunds is written clearly and you understand the required process for receiving them.
  • Termination clause: Many businesses think they’re locked into the current rates until the end of the contract. Remember that you can renegotiate at any time, but there may be a penalty written into your contract through a termination clause. Fight for no early termination penalties when you start to renegotiate or negotiate a new contract.

Let P3 Negotiate With FedEx and UPS on Your Behalf

It seems like the steps are endless when it comes to negotiating contracts with UPS or FedEx. Many business owners don’t have the workforce to dedicate someone to the continuous task of small parcel auditing and negotiations. What if you could have an expert in the shipping industry handle everything for you with zero upfront costs?

P3 Cost Analysts will do just that. We can save you weeks of time by handling negotiations for you while bringing you savings like we’ve done for many other companies before you. Most of our clients save 15 to 20 percent on shipping costs.

Our expert team consists of former UPS and FedEx employees, so they truly understand the ins and outs of parcel contracts with these companies. In addition, they have insight into the shipping industry, giving you the negotiating power to save tons of money each month. Chat with one of our P3 experts and have a free shipping consultation today.

Summing Up UPS and FedEx Negotiated Rates

The very first step towards coming out on top when negotiating shipping rates with FedEx or UPS is that you can, in fact, negotiate when creating these contracts. You don’t, and you shouldn’t, blindly accept the rates that they offer you right off the bat.

While these contracts can be extremely complicated to understand, if you take the time to learn how to navigate them, you’ll be able to save your business tons of money with discounted FedEx shipping or UPS negotiated rates.

When considering how to negotiate UPS rates or FedEx rates, the most important thing you can do is plan ahead and have a solid understanding of your shipping analytics. By knowing your needs and where you’ve been spending the most money on previous invoices, you’ll be armed with the information you need to create a contract that works for you.

If negotiating isn’t your strong suit or you simply don’t have the time, let P3 Cost Analysts handle FedEx and UPS contract negotiation for you. Contact us today.

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