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Negotiating with the parcel negotiation firms


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Negotiating with the parcel negotiation firms

  2. 2. NEGOTIATING WITH CONSULTING COMPANIES • Are you familiar with gainshare and why it sounds like a good deal? • “If I don’t save you money then it costs you nothing.” • Gainshare works for some, • In particular the first year
  3. 3. NEGOTIATING WITH CONSULTING COMPANIES • Their fees are negotiable. • Consider asking for both a flat fee for a project as well as a gainshare model. • The project could be a combination of both by the way • Ask for diminishing gainshare over time or as your volume goes up. • Vey important if your company acquires a company during the term of the agreement • Ask for the first “x” percent for yourself as you would have been able to achieve some discount without a consultant • Put a cap on the gainshare paid out • Ask for a performance guarantee • If they have ongoing services like reporting ask for that for free as part of the deal
  4. 4. NEGOTIATING WITH THE NEGOTIATORS • Make sure consultancy provides shipment level detail so you can audit their savings calculations • Make sure contract states they can’t take savings for modal changes (e.g., they can’t take savings between FedEx Ground by switching you to FedEx Smartpost) unless this was a recommendation by the consultant and agreed to upfront and there is a valid way to discern for example what shipments now going Smartpost would have gone Commercial Ground with Residential add on fee prior to their recommendation • Or even more difficult to discern what shipments now moving ground used to be the ones that formerly moved air
  5. 5. NEGOTIATING WITH THE NEGOTIATORS • Term of contingency is negotiable • State in contract that savings is for current company and not applicable to acquisitions • Make sure contract states what ongoing work is to be performed by the consultant (carrier management, Quarterly Business Reviews (QBR’s), impact model of carrier annual rate increase, reporting, etc.)
  6. 6. NEGOTIATING WITH THE NEGOTIATORS • A consultant may be willing to give a percentage of compensation to yourfavorite charity forthe duration of the contract • You may want to separate freight auditors from consultants specializing in contract negotiation. What’s the core competency?
  7. 7. NEGOTIATING WITH THE NEGOTIATORS • Most companies are not good at both • Auditing for correct rate application • Auditing for late shipments • Negotiating parcel contracts • There may not be a motive on the part of some companies to negotiate the best for the shipper if it diminishes the audit companies income for late shipments or incorrect invoices 7
  8. 8. NEGOTIATING WITH THE NEGOTIATORS • If your shipping is significantly growing, you can cap the total compensation in Years 2 & 3 to Year 1 compensation (so the consultant is not getting unduly compensated simply based on your growth) • A competitive bid of your business to the consulting community will get consultants to significantly come off their typical fees, however the low cost consultant may not maximize your net savings... evaluate capability, experience, the individual who will work your bid, and cost
  9. 9. NEGOTIATING WITH THE NEGOTIATORS • Give each firm a sample of your distribution (one month Package Level Detail (PLD)) and ask them to model potential savings. • Granted this might get you thinking about trying to do this on your own but the stakes are too high and the tariffs and offers too complex for shippers to get the very best deal on their own today. • Compare results, you may want to go with the company that can save you the most – but make their compensation contingent on achieving that result (or better) ... . • (To avoid a firm assessing unrealistic savings, you may want to add a clause to contract stating that if they don’t reach savings target, they’re paid nothing.).
  10. 10. NEGOTIATING WITH THE NEGOTIATORS • Ask your carrier rep to find out what their company’s experience is with consultancy. • For example some parcel negotiation firms are in litigation with the two major parcel carriers. (Note, some carrier reps may try to disparage consultancy to avoid revenue dilution. Non-incumbent carrier may be better to ask about references.) • Deal only with principals, not untenured junior associates that often don’t yield the same results... • Know WHO will be handling YOUR account, and their experience...ask for resumes of the consultants who will be analyzing and negotiating.
  11. 11. IF YOU WOULD LIKE INFORMATION OR A RECOMMENDATION AS TO WHAT FIRM MIGHT BE THE BEST FIT FOR YOU • Jerry Hempstead • 1724 Buckhorn Pl • Orlando Fl 32825 • 407-342-3825 •