This is the slide that frequently surprises my audience. We’ve found that accessorial charges – that is, additional fees assessed by the carriers that you have to pay in addition to the transportation costs of a shipment – account for 10-20% of a company’s overall freight spend. So if you think you’re paying $10 for a shipment, chances are, by the time you get your invoice, you’re paying $11 or $12 for that shipment. This slide are the accessorial charges for one of the largest entertainment companies in the world (headquartered in Burbank). Of the $17M or so they spent with the carrier we audited, add-on charges accounted for nearly $6M, or 35% of their expenditures. And they had a decent contract, with decent rates and some accessorial concessions already.
Insolation : Customers compare to their lowest (unrealistic) discount versus competitor offers. Bleeding off any business is penalized Giving more business or upgrading existing business is incented Rate comparison is difficult. They measure savings by comparing discounts to their own list price.
You don’t getwhat you deserve, YOU GET WHAT YOU NEGOTIATE. WHATS NEGOTIABLE? EVERYTHING!
Great News for shippers• FedEx Express Standard List Rates• Effective Jan. 7, 2013 FedEx Express package and freight rates will increase an average of • 5.9% for U.S., U.S. export and U.S. import services.• The shipping rate increase will be partially offset by adjusting the fuel price at which the fuel surcharge begins, reducing the fuel surcharge by 2 percentage points. (REALLY?)• FedEx Express U.S. rates to Puerto Rico will change.• FedEx International Premium® rates will change.• Minimum rates for FedEx Express® services will change. The carriers cant afford to loose your shipments And will fight to take your shipments from a competitor
2012 Rate Change Information• Effective January 2, 2012, the published rates have increased;• Package• Ground services increased a net 4.9% through a combination of a 5.9% increase in rates and a 1 percentage point reduction in the UPS Ground fuel surcharge.
Average Model Remove Space SHIPMENTS If "#VALUE!" occur, try this button. Zone 2 Zone 3 Zone 4 Zone 5 Zone 6 Zone 7 Zone 8 Letter 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 3 1 1 1 1 1 1 1 4 1 1 1 1 1 1 1 5 1 1 1 1 1 1 1 6 1 1 1 1 1 1 1 7 1 1 1 1 1 1 1 8 1 1 1 1 1 1 1 9 1 1 1 1 1 1 1 10 1 1 1 1 1 1 1
EVEN AS A PEDDLER• I did not know all the concessions my peers were getting form my own pricing department (nor were they telling)• I as a peddler did not tell shippers all the discounts and waivers and concessions they could get.
UNLESS• You work for all three carriers (4 if you count the USPS) in the pricing department, TODAY, you don’t know what the best deal is or the lowest price or incentives or concessions are.• I WILL TRY TO FACILITATE THE NEXT BEST THING
HAVE You (or your employer) EVER NEGOTIATED ReducedAddress correctionResidential SurchargeDelivery Area SurchargeCOD FeeDim RuleFuel SurchargeMinimum chargeInsurance Minimum
HAVE You EVER NEGOTIATED WaivedAddress correctionResidential SurchargeDelivery Area SurchargeOversize RuleDin RuleFuel SurchargeCOD FeeMinimum chargeInsurance Minimum
HAVE You EVER NEGOTIATEDRevenue ThresholdsPercentage’s offFlat $ amount offFlat ratesStart Up incentivePer shipment pricingRamp up periodQuarterly incentiveLock in the base year tariff &rulesYearly incentive
Fuel Surcharges Caveat EmptorNote to self: Are fuel surcharges Negotiable?Can you tell your carrier“the contract I sign now are the rates I want to pay for the duration of thecontract and you will not honor any additional charges for the length of thecontract.”Currently the air fuel surcharge is 13.5% (example Jan 11 = 9%)(going to14% Nov 5)But the carriers have moved 2% of the fuel surcharge into the base tariffevery year for the last 6 yearsSo with compounding its about 13% of the fuel surcharge formula that’salready baked into the base rate. They did this in anticipation of fuelcoming down so they did not have to forfeit all of it back to shippers
Do you have to agree that your discount is off of the base tariff in effect at the time of shipment• Or would it be prudent to tell the carrier• “the base tariff in effect on the day we sign the contract is the base tariff that will stay in effect for the duration of the agreement”?• Nothing prevents the carrier from taking up the base tariff all they want.
DOES YOUR CONTRACT PREVENT YOUR CARRIERS FROM DOING THIS?• Dimensional Weight Replaces • FedEx Ground Dimensional Oversize in 2007 Effective January Weight Rate Calculation (effective 1, 2007, Oversize charges for large February 5, 2007) packages shipped via UPS Ground • For FedEx Ground shipments, a services will be replaced with a rate calculation based on simpler rate calculation based on dimensional weight will replace dimensional weight. oversize charges for packages that are 3 cubic feet (5,184 cubic Dimensional weight rates are inches) or larger. These packages applicable only to UPS Ground will be billed based on dimensional packages that are three cubic feet weight unless actual weight is (5,184 cubic inches) or larger. greater. Packages smaller than 3 Billable weight will be based on cubic feet will be billed based on actual package weight or the actual weight. dimensional weight, whichever is greater. Packages smaller than three cubic feet will be billed based on actual weight 194 166Some shippers still enjoy the old girth rule 139
• Both FedEx and UPS changed• in January 2011• the divisor on air and ground domestic shipments from 194 to 166,• the factor used to determine whether a package is subject to higher Dimensional or cubic rates
Can they change this at will?• Dimensional Weight• Express. Dimensional weight is calculated by multiplying the length by width by height• of each package in inches and dividing the total by 166 (for shipments within the U.S. and• shipments between the U.S. and Puerto Rico) or 139 (for U.S. export and U.S. import-rated• international shipments). If the dimensional weight exceeds the actual weight, charges• may be assessed based on the dimensional weight. Dimensions of one-half inch or greater• are rounded up to the next whole number; dimensions less than one-half inch are rounded• down. The final calculation is rounded up to the next whole pound. Dimensional weight• applies per package or per shipment to all FedEx Express U.S. shipments in customer• packaging, and per shipment to all international shipments and U.S.-to-Puerto Rico• shipments in customer packaging. Shipments in FedEx packaging may be subject to• dimensional-weight pricing.• Ground. Dimensional weight may apply to FedEx Ground packages that are 3 cubic feet• (5,184 cubic inches) or larger. Multiply the length by width by height of each package in• inches. If the total is 5,184 or greater, calculate dimensional weight by dividing by 166• (for shipments within the U.S.) or 139 (for shipments to Canada). If the dimensional weight• exceeds the actual weight, charges may be assessed based on the dimensional weight.• If the chargeable weight exceeds 150 lbs., a prorated per-pound rate will be used.• Dimensions of one-half inch or greater are rounded up to the next whole number;• dimensions less than one-half inch are rounded down. The final calculation is rounded• up to the next whole pound. If the package measures less than 5,184 cubic inches,• dimensional weight does not apply and charges will be assessed based on actual weight. Might the next move to be to 139 ?
UPS Store franchisee files suit against UPS• According to the complaint, franchisees weigh and measure customer packages in their stores, and charge customers accordingly. They then ship the package to UPS, where the company re-measures the package and charges the store owners for the difference.• Perhaps here is a flaw in some of the shipments you tender for which they charge you dimensional weight• Can you negotiate out those defects?
DO YOU KNOW ?• The USPS is able to negotiate with you a competitive, shipper specific rate for – Priority Mail; & Express Mail• They are extremely competitive in the lighter weights• Have no delivery area surcharge, no residential surcharge, no address correction fee and no fuel surcharge• Do you know that these products FLY on the FedEx & UPS networks when moving over 300 miles?
DO YOU REALLY HAVE A “CONTRACT”?• You can ask carriers, including incumbents, for bids any time you like – Unless you agreed to one, there is no penalty – You can drop your carrier at any time – Their recourse is only to diminish your discount over time• Your contract says they can drop your discount at any time.• You are not compelled to give all your freight to one carrier – Unless you signed up for same• They are not compelled to give you service. – Do they pay you a penalty if they go on strike or miss a pick up?
DO YOU REALLY HAVE A “CONTRACT” • What you really have is an “at will” agreement that says • “If you give a carrier “x” amount of business (shipments/revenue/both)” • They “will extend to you discount “y” as a dollar amount, or percentage off a tariff, or both.” • Or some have hard wired cell by cell rates
50% Off Of What ?Carrier Year Carrier YearService Level 1 Service Level 1 Minimum Charge: 0.00 Minimum Charge: 0.00 Fuel Surchare: 0.00% Fuel Surchare: 0.00%Weight Discounts Zone 2 Zone 3 Zone 4 Zone 5 Zone 6 Zone 7 Zone 8 Weight Discounts Zone 2 Zone 3 Zone 4 Zone 5 Zone 6 Zone 7 Zone 8 Letter 0.00% Letter 0.00% 11.40 11.65 12.10 13.65 16.90 17.60 17.75 1 50.00% 6.05 6.20 6.43 7.28 9.18 9.60 9.73 1 50.00% 5.83 5.95 6.18 7.00 8.83 9.23 9.35 2 50.00% 6.15 6.33 6.58 7.75 10.13 11.03 11.53 2 50.00% 5.93 6.08 6.33 7.45 9.73 10.60 11.08 3 50.00% 6.18 6.53 6.95 8.53 11.65 12.80 13.23 3 50.00% 5.95 6.28 6.68 8.20 11.20 12.30 12.70 4 50.00% 6.35 6.73 7.50 9.95 13.45 14.60 15.05 4 50.00% 6.10 6.48 7.20 9.55 12.93 14.03 14.45 5 50.00% 6.55 6.98 8.18 11.03 15.00 16.23 17.13 5 50.00% 6.30 6.70 7.85 10.60 14.40 15.58 16.45 6 50.00% 6.83 7.23 8.90 12.05 16.70 18.05 18.78 6 50.00% 6.55 6.95 8.55 11.58 16.05 17.35 18.03 7 50.00% 7.10 7.93 9.65 13.18 18.78 20.00 20.65 7 50.00% 6.83 7.63 9.28 12.65 18.03 19.20 19.83 8 50.00% 7.40 8.65 10.33 14.35 20.75 22.05 22.73 8 50.00% 7.13 8.33 9.93 13.78 19.93 21.18 21.83 9 50.00% 7.80 9.03 11.15 15.40 22.58 24.18 24.95 9 50.00% 7.50 8.68 10.73 14.80 21.68 23.23 23.95 10 50.00% 8.15 9.60 12.00 16.45 24.10 26.30 26.98 10 50.00% 7.83 9.23 11.53 15.80 23.15 25.25 25.90 MOST ASSUME THE BASE PRICE IS THE SAME
Pricing is More complex with internationalAfghanistanDHL Scale LFedEx Scale OUPS ?????AlbaniaDHL Scale EFedEx ?????UPS Scale 407
Minimums Do I really have a discount at all?Many contracts are set so that no discounts Discou Weight nts Zone 2 Zone 3 Zone 4 Zone 5 Zone 6 Zone 7 Zone 8will drop below the rate Letter 0.00% of a 1 30.00% 3.84 4.08 4.16 4.34 4.54 4.61 4.68 Zone 2, 1 LB charge 2 30.00% 4.09 4.35 4.72 4.82 5.08 5.19 5.36 3 30.00% 4.15 4.54 4.96 5.11 5.38 5.53 5.92 4 30.00% 4.25 4.68 5.21 5.45 5.65 5.89 6.34 5 30.00% 4.38 4.74 5.43 5.66 5.87 6.15 6.68 6 30.00% 4.49 4.88 5.51 5.80 5.96 6.33 6.83 7 30.00% 4.71 5.02 5.61 5.94 6.14 6.49 7.05 8 30.00% 4.90 5.15 5.76 6.06 6.33 6.78 7.46 9 30.00% 5.00 5.29 5.85 6.18 6.45 7.13 7.92 10 30.00% 5.16 5.31 5.96 6.36 6.73 7.62 8.44 Current Minimum is $5.49 before the fuel surcharge Note to self: Ask for no minimum or lower minimum
Minimums Do I really have a discount at all? Many contracts are set Discouso that no discounts will Weight nts Zone 2 Zone 3 Zone 4 Zone 5 Zone 6 Zone 7 Zone 8drop below the rate of a Letter 0package below the Zone 1 30.00% $5.49 $5.49 $5.49 $5.49 $5.49 $5.49 $5.49 2, 1 LB charge 2 30.00% $5.49 $5.49 $5.49 $5.49 $5.49 $5.49 $5.49 3 30.00% $5.49 $5.49 $5.49 $5.49 $5.49 $5.53 $5.92 4 30.00% $5.49 $5.49 $5.49 $5.49 $5.65 $5.89 $6.34Example: Given a 30% 5 30.00% $5.49 $5.49 $5.49 $5.66 $5.87 $6.15 $6.68discount, the red cells 6 30.00% $5.49 $5.49 $5.51 $5.80 $5.96 $6.33 $6.83 below would not 7 30.00% $5.49 $5.49 $5.61 $5.94 $6.14 $6.49 $7.05 receive the entire 8 30.00% $5.49 $5.49 $5.76 $6.06 $6.33 $6.78 $7.46 discount level 9 30.00% $5.49 $5.49 $5.85 $6.18 $6.45 $7.13 $7.92 10 30.00% $5.49 $5.49 $5.96 $6.36 $6.73 $7.62 $8.44 Note to self: Ask for no minimum or lower minimum
Shipment Pricing• BUNDLED PRICE HAS 200 LB MINIMUM FROM ONE SHIPPER TO ONE CONSIGNEE• BUNDLED PRICE HAS MINIMUM CHARGES• BUNDLED PRICE USES AVERAGE 15 LB PIECES
NEW AND IMPROVED WAYS TO ENHANCE YEILDIts not always apples-to-apples AT THE MOMENT UNIQUE TO UPS
Accessorial Charges Analysis SAT P/UP 1.88% SAT DDL 17.29% DIM 19.32% Accessorial charges COD 7.97% can account for as much as 40% of total DAS FUEL 19.79% spend! 26.32% ADDRESS Note to self: Do I know 09.18% the impact to my INSURANCE 01.76% business
Delivery Area Surcharges (DAS)Over 25% of the US population now lives in a DAS zip23,427 DAS zips out of a total of about 43000 or 53% of all zips16,826 or 83% of the Commercial Delivery Area zip codes carry an Extended
Declared Value Going up again • UPS and FedEx $0.80 in 2013 • $2.40 minimum • Check to see if your employer is self insured or has a cargo rider on its corporate insurance policy • Look into PIP www.pipinsure.com • U-PIC www.u-pic.com • Shipsurance www.shipsurance.com Never ever buy carrier provided insurance.
Penetration Selling for the Carriers:They have some of your business and are pursuing more. Ground, Air, International
Conversion Selling for the Carriers: They have NONE of your business:•Expect Aggressive Discounts•Make sure all service concerns are covered•Test for smooth operational transition •Expect your incumbent carrier back in a few months with a “Conversion Quality” contract Note to self: Conversion status gets the best pricing!
Is this news?• A District Sales Manager has more pricing latitude than a sales rep• A Regional Sales Manager has more pricing latitude than a Sales Manager• An Area VP has more pricing latitude than a Regional Sales manager• A Senior VP has more latitude than an Area VP• An Executive VP has more latitude than a Sr VP• The President has more latitude than an EVP• And whomever you get involved wants to win and would hate to be blamed for loosing a deal Note to self: Get my deal up the food chain as high as I can!
UPS Says the same folksmake the decisionsfor all the productsNote to self: Promote ALL the biz to get the best pricing !
UPS says the sales folks arecommissioned more for inboundcollect. Therefore you can get abetter deal by holding out theinbound you can control
The complexityOf Earned Discounts with package or revenuethresholds
IN CONFUSION THERE IS PROFIT They do this, because they can
They can price specifically to• your shipment distribution by weight and zone Cell by Cell / Matrix Incentives
All Services Make sure they count all the Commercial revenue ResidentialAgreement Page - 42 Services Inbound Outbound Third Party Make sure all sites and account numbers are included Note to self: Have I asked for a discount on all the services, all the sites and all the billing types!
Anybody can get 44% off on air They knowand 19% off on ground the tricks
WHAT SHIPPER KNOWS WHAT THEY ARE PAYING AND HOW WILL A SHIPPER EVER COMPARE WHAT THEY ARE PAYING TO ANOTHER CARRIERS OFFER
Parcel Magazine & Morgan Stanley SURVEY RESULTSPARCEL TRENDS REVEALEDRate Your CarriersPart 1: Results of the Annual Best • 11 percent of surveyPractices Survey:Over 250 Respondants, respondents useOver 90 million parcels consultants to negotiate rates. • Consultants negotiate more favorable rates, driving discounts 49% lower than if the company negotiates.
WHAT MIGHT BE NEGOTIABLE• EVERYTHING!!!• RATES• DISCOUNTS• ACCESSORIALS• DELIVERY COMMITMENTS AND GUARANTEES• FUEL SURCHARGES• CLAIMS RATIO’S
Presenting your Freight Characteristics Whats attractive to the carriers Attribute Good Bad Number of locations Few Many Number of shipments Lots Few Weight High Low Commercial v residential High Low Pick up density High Low Delivery density High Low Ground distance Long Short Air Distance Short Long International v Domestic High Low Multi piece shipments Many Few Liability Low claims exposure High Claims Seasonality Year round Seasonal peakNote to self: Package my book of business to maximize theappeal to the carrier
WHATS POSSIBLE• MONTHLY, QUARTERLY, YEARLY INCENTIVE PROGRAMS – BASED ON REVENUE OR SHIPMENTS OR BOTH• AUTOMATION INCENTIVES• START UP INCENTIVES• RAMP UP/IMPLEMENTATION PERIODS
Pay Attentionmoney is wasted on selecting air services where next day is guaranteed viaground and or second day ground where 2 day air is being used. Note to self: Ask for a service agnostic tariff
Service Guarantee Lets cut to the chase• In the event Brown, Purple or Yellow Carrier • (or postal code for international shipments). In fails to attempt delivery within the time addition, Brown, Purple or Yellow Carrier reserves published on the Brown, Purple or Yellow the right, in its sole Carrier website, or as • discretion, to refuse to honor a request for a credit or• provided when 1-800-PICK-Brown, Purple or refund of transportation charges for a Yellow Carrier is called, Brown, Purple or • package when that package is not accompanied by a Yellow Carrier, at its option, will either credit smart label and timely Package Level Detail or refund the • (PLD) information, as defined in the Brown, Purple or Yellow Carrier Tariff, at the time the package is• transportation charges for each such tendered to Brown, Purple or Yellow Carrier. package to the payer only, upon request, • (d) Each Brown, Purple or Yellow Carrier 2nd Day Air subject to the A.M. package is addressed to a commercial, not residential, address.• following conditions. This is the sole • A residential delivery is defined as provided in the remedy available under the Brown, Purple Brown, Purple or Yellow Carrier Tariff and in this or Yellow Carrier Service Guarantee. service guide.• (a) Brown, Purple or Yellow Carrier’s • (e) Each package in a shipment bears a Brown, guaranteed delivery schedule has been Purple or Yellow Carrier Saturday Delivery routing obtained by referencing Brown, Purple or label when optional Yellow Carrier’s website or • Saturday service is requested and available. • (f) Each package in a shipment is tendered to Brown,• contacting a Brown, Purple or Yellow Purple or Yellow Carrier during Brown, Purple or Carrier Customer Service office. "On-time" Yellow Carrier’s published business hours. means, subject to the terms of this Brown, • Packages received from or destined to certain Purple or Yellow Carrier locations may require earlier pick up times• Service Guarantee, delivery is attempted • (available at the Brown, Purple or Yellow Carrier within the Brown, Purple or Yellow Carrier website) to meet delivery time commitments. guaranteed delivery schedule. • (g) Brown, Purple or Yellow Carrier is notified in writing or by telephone of a service failure within• (b) Each package is properly recorded on a fifteen (15) calendar Brown, Purple or Yellow Carrier source • days from the date of scheduled delivery and is document or in a Brown, Purple or Yellow advised of the consignee’s name and address, Carrier automated • date of shipment, package weight and Brown, Purple• shipping system. or Yellow Carrier tracking number. • (h) For Brown, Purple or Yellow Carrier Worldwide• (c) Each package in a shipment bears the Expedited shipments, the guarantee shall apply only appropriate Brown, Purple or Yellow Carrier to shipments tracking label and an address label, or • originating in, or destined for, the United States, and
Waive the service guarantee• All carriers fail• All the guarantee means is that is the carrier fails, you can apply for your money back• So the failures require work on your part to find them and file for them• Or for a third party to do, with whom you are now going to split some of that savings• So why not figure out what percentage of your bill is saved by filing for service failures• Then say to the carrier that you will waive the right to file service claims and that the carrier just reduce the tariff by that amount• Or send you a refund for a percentage at the end of the month.
It’s the win-win• You don’t have to research them and file them• You don’t have to split the savings with an audit firm• The carrier does not have to research them for validity• And you get the savings you deserve inherent in the service guarantee
PREpurchased Options• FedEx Express® Prepaid Stamps• These prepaid shipping labels for FedEx Express® • USPS shipments take the place of airbills, allowing you to allocate shipping costs — and specify a FedEx® • Has a menu of flat delivery service — upfront. FedEx Express Prepaid Stamps are nonrefundable and nontransferable. rate priced options FedEx reserves the right to bill an additional amount for packages that exceed standard acceptance limits or require special handling.• Service DescriptionDelivery AreaAvailable for FedEx Priority Overnight®, FedEx Standard Overnight® and FedEx 2Day® delivery throughout the contiguous U.S.Instructions• To order, call 1.901.397.3650 or download our online order form.• If you have questions, please download FedEx Express Prepaid Stamps FAQs.• Minimum order is 10 prepaid stamps.• You must specify a shipment weight and FedEx Express delivery service.• Contact your FedEx account executive for more information.• Exceptions• FedEx SameDay®, FedEx First Overnight®, FedEx Express Saver® and FedEx Express® Freight services are not available.• No additional service options, such as Saturday delivery or Hold at FedEx Location, are available.• Special FeesA $4 fee may apply for courier pickup if the shipper does not have regular scheduled
Carrier Agreements Important to Review RIGHT NOW: • Revenue commitments • Locations included • Discounts offered • Terms and conditions • Addendum’s • Rate charts • Portfolio ServicesNote to self: Have things changed and whats negotiable?
If you liked what you heard• Jerry Hempstead• 1724 Buckhorn Pl• Orlando Fl 32825• 407-342-3825• firstname.lastname@example.org
Notes to SelfNote to self: Conversion status gets the best pricing!Note to self: Get my deal up the food chain ad high as I can!Note to self: Package my book of business to maximize the favorable and downplay the unfavorable!Note to self: My LTL is eventually going to be a big carrot to the parcel carriers!Note to self: Promote ALL the biz to get the best pricingNote to self: Start contract during highest volume or have the carrier start you off got a guaranteed time with the highest discount!Note to self: Have I asked for a discount on all the services, for all my sites and all the billing typesNote to self: Have things changed and whats negotiable?Note to self: Consultants can get you a 49% better discount than you can achieve on your own