Why Are Parcel Carrier Contracts So Confusing?

If you’re shipping a small package from your home or small business, there’s not much to it. Take the box to the post office or one of the other shipping companies and fill out a packing slip with the TO: and FROM: address information, print the label, pay the clerk, and off your package goes. Depending on the size, weight, insurance, and speed of delivery, costs can vary.

Now imagine shipping hundreds or thousands of boxes per day. The costs can add up quickly, which is why many larger businesses that ship a lot of parcel negotiate special rates with the major carriers. These special rates are outlined in what are called parcel carrier contracts, or custom parcel agreements.

All parcel carrier contracts are not created equal. Each parcel carrier contract is custom designed for that particular client based on their specific needs and shipping volumes. The contract itself is several pages long and chalk full of legalese. Many C-Level executives have toiled and labored trying to understand their parcel carrier contract. Even if they manage to get through the contract, oftentimes they still don’t know whether or not they’re getting the best rates available. While they receive discounts over retail, they are still, in essence, at the mercy of the carrier. This is why many businesses with parcel carrier contracts engage parcel specialists to review their agreements. These parcel specialists ensure the client is receiving the best discounts.

According to the Parcelindustry.com, here are some common items that can be found or included in custom parcel agreements between big businesses and major carriers:

• Rate discounts
• Service, weight, and zone
• Published minimum
• Minimum discounts
• Rate discounts
• Tier discounts
• Accessorial discounts
• Custom types and categories
• Discounts and types
• Published charge
• Dimensional weight factor
• Payment items
• Rate caps
• Service-based refunds
• CWT or MWT
• Ramp-up period
• Any other customized items that are discussed and agreed upon between the major carrier and the big business

Regular folks outside the shipping world could easily find themselves frustrated trying to understand any one of the points above. Not many CFO’s can explain what, “manifested but not shipped,” means. Enlisting the help of a parcel expert is analogous to using a lawyer versus defending yourself in court.

In addition to utilizing an industry expert, make sure that negotiations with the major carriers are driven by actual data. When you apply data-driven intelligence to your company’s unique shipping needs and characteristics the process of negotiating parcel agreements with major carriers will be less confusing and more informed.