Step 26. How to Ship and Negotiate Logistic Contracts

Shipping can cost a fortune (in case your business is not a services or virtual products or you offer something you don't need to deliver at all). I have gathered several tips from different sources that I found helpful for me and hope they will be useful for you as well:

Getting your product from A to B quickly and efficiently is a relatively easy task for larger companies with big budgets to match. But for an SME watching its spending, shipping goods by land, sea or air requires careful consideration to ensure costs remain manageable.

While some small businesses rely on Royal Mail or even deliver themselves, others prefer to use the services of dedicated logistics companies. So how can small businesses get the best deal and ensure their goods are delivered on time, safely and cheaply?

In an interview with the Entrepreneur website, US small business owner Rhonda Abrams advises: "A lot of small businesses think they're not large enough to negotiate rates with the delivery services, but they can. Open an account, get a rep and talk about options."

Some tips from me:

• try to find low cost delivery an negotiate with them your low amounts
• try to research standard post options
• have a look at offering delivery to some shopping center locally for local customers
• if you offer combined offers with any of your partners, think of how deliver with them together
• in case you use Amazon to promote your products and expand your , have a look at their delvery services and terms and conditions there.

And some tips from Inbound Logistics on renegotiating your shipping contracts as you grow:

1. Review service contracts line by line. Don't assume to know the true meaning of the fine print. If you don't understand the terminology in the contract, seek consultation from the carrier's representative, or from a qualified freight consultant, to help decipher the language.

2. Be aware of "unless otherwise noted." Most carrier service contracts offer incentives for outbound prepaid shipments only—unless otherwise noted. It is the shipper's responsibility to sift through the contract to see if it is, in fact, noted.

Shippers also need to be covered for inbound shipments. Many shippers have receiving departments that receive small package carrier deliveries every day. If a discount isn't applied when shipments are delivered to a receiving department, you could be overspending.

3. Ask for base incentive discounts. Base incentive discounts are usually expressed as a flat percentage discount for each individual package, and vary among multiple, specified weight ranges. These discounts aren't always included in contracts, so shippers must ask for them.

4. Be sure the contract lists all the services your organization uses. This helps ensure that services align with your needs, and are counted toward tier incentive discounts. These discounts are based on the total "weekly rolling average" revenue—the gross dollar volume tendered to the carrier each week—for eligible services only. And, you guessed it—only listed services are eligible.

5. Employ the services of a freight association. If you have a small package shipping budget of $20,000 or more annually, freight associations can be an invaluable resource. With access to cooperative buying power and expertise in contract negotiations, they can help companies save on freight costs regardless of volume or mode.

6. Always employ "positive uniqueness." In addition to mentioning that other carriers want your business, express to carriers the positive, attractive aspects of doing business with your organization. Carriers favor delivery density, air shipments, and heavier package pickups and deliveries. Be your own best advocate.

7. Pay attention to carrier rules tariffs, and know the surcharges. The rules change often, so companies must be proactive. Check carrier web sites frequently to remain current and unaffected by increasing costs.

The carrier contract negotiation process can be confusing and intimidating. Taking control of the fine print, understanding the benefits of the various services, and handling the broad range of rate enhancements is a complex task. But paying close attention to the small print can mean big savings to a company's bottom line.