In today’s competitive business landscape, managing your shipping costs is not just a bonus—it’s a necessity. And when it comes to shipping, UPS remains a significant player in the industry. While the company offers reliability and a broad range of services, it’s easy to make costly mistakes when negotiating your shipping rates with them. This blog aims to highlight the top 5 mistakes that businesses frequently make during UPS rate negotiations and provide actionable insights on how to avoid these pitfalls.
Mistake 1: Lack of Preparation
Overview
You wouldn’t walk into a board meeting without preparing, so why go into a rate negotiation with UPS without adequate groundwork? Many businesses think a quick phone call or meeting can sort out rates, but the reality is different. Effective negotiation begins long before you sit at the table.
Consequences
Walking into negotiations unprepared can have several ramifications. You may end up with high rates, excessive surcharges, or hidden fees that become apparent only after you’ve sealed the deal.
Solutions
To be prepared, you need to understand your shipping needs and how UPS prices its services.
- Analyze your shipping data to identify patterns, such as your most common shipping destinations, package sizes, and shipping frequencies.
- Research industry standards and what rates similar businesses are getting.
- Become familiar with UPS’s pricing models, such as dimensional pricing and the various surcharges that may apply to you.
Being well-prepared will give you the leverage you need to negotiate rates that are favorable to your business.
Mistake 2: Not Understanding Contractual Terms
Overview
Legal jargon can be overwhelming, but understanding your shipping contract’s terms is crucial. Too many businesses sign these contracts without fully grasping what they are committing to.
Consequences
If you don’t understand the contract, you might miss hidden fees, volume commitments, and other clauses that could cost you in the long run.
Solutions
- Take time to read through the contract carefully.
- Highlight any terms you don’t understand and consult a legal advisor if necessary.
- Discuss all terms with your UPS account manager and don’t hesitate to ask for clarification.
Understanding your contract can help you avoid unpleasant surprises and put you in a better position for future negotiations.
Mistake 3: Ignoring Seasonal Trends and Volume Discounts
Overview
Shipping is rarely consistent all year round. Holiday seasons, promotional periods, and even weather changes can dramatically affect your shipping volume and costs. Yet, many businesses fail to consider these fluctuations when negotiating with UPS.
Consequences
By ignoring seasonal trends, you might miss out on leveraging higher volumes for better rates. Likewise, during low-volume seasons, you could be subject to fees for not meeting minimum volume commitments.
Solutions
- Review historical shipping data to identify seasonal trends.
- Bring these insights into negotiations, aiming for a flexible contract that accommodates these fluctuations.
- Discuss volume discounts and make sure they are clearly stated in your contract.
Being aware of your shipping patterns will allow you to negotiate a contract that is beneficial year-round.
Mistake 4: Focusing Solely on Base Rates
Overview
The base shipping rate is often the headline figure in any negotiation. But that’s only the top of the ocean. Many businesses focus exclusively on lowering this rate, overlooking additional fees and surcharges.
Consequences
By focusing solely on the base rate, you risk overlooking other charges that could significantly affect your overall shipping costs. These can include fuel surcharges, residential delivery fees, and weekend or holiday delivery charges.
Solutions
- Request a comprehensive list of all potential fees and surcharges from UPS.
- Factor these into your overall cost calculations.
- Negotiate not just the base rate but also these additional costs.
Mistake 5: Not Reviewing and Auditing Bills Regularly
Overview
You’ve negotiated what you believe to be a great contract, so you can just set it and forget it, right? Wrong. Many businesses make the mistake of not regularly reviewing their shipping invoices and conducting freight audits.
Consequences
Failure to review your bills can lead to continued overpayment due to billing errors or changes in your shipping behavior. Additionally, you may miss opportunities to renegotiate your rates based on performance and volume changes.
Solutions
- Implement regular freight audits to ensure you are being billed correctly and to identify any patterns or anomalies.
- Make it a habit to review your shipping needs and performance against your contract at least quarterly.
- Use this data for future negotiations, either to claim refunds for billing errors or to negotiate more favorable terms.
Conclusion
Navigating UPS rate negotiations doesn’t have to be a minefield of errors and missed opportunities. By avoiding these five common mistakes—lack of preparation, not understanding contractual terms, ignoring seasonal trends and volume discounts, focusing only on base rates, and not regularly auditing your bills—you can negotiate a contract that is favorable to your business. Not only will you reduce your shipping costs, but you’ll also position your business for more efficient and effective operations.
Don’t let another shipping invoice surprise you. Get educated, get prepared, and enter negotiations fully aware of what you need and what you can offer. And if it all seems too daunting, professional help is available. Beteachon Freight Auditing offers expert consultation and auditing services to help you navigate the complexities of shipping contracts and come out on top.