Wasteful spending is not just rampant in Washington D.C, but with small package shippers as well. The fact is, there are only a handful of companies in the US that get the best shipping rates with UPS and FedEx (The Dynamic Duo) and even fewer that ensure their rates are fully optimized. Rates rose another six percent or more, yet most executives I speak with are convinced they are getting the best deal. So why are so many shippers absolutely, positively certain they are saving the most money on transportation when in reality, they're not?
Executives feel good when their carrier representative provides higher discount percentages in their agreement than they did the year before. As long as the discount percentage goes up a point or two, they eagerly accept the new terms. While this method may have worked years ago, it's a surefire way of increasing transportation costs today. This is because discount percentages are only one of many factors that contribute to overall cost. Old techniques are no longer effective.
Also, there's a perceived inability to shop for the best rates. Glasnost was a term used in the 80s during the Ronald Reagan years meaning "openness." President Reagan had built rapport with Russian President Michael Gorbachev. They worked together to prevent economic and world catastrophes and made agreements with one another that profoundly changed our world. But, they didn't trust each other. They publicly smiled at each other and used terms such as "Trust but verify."
Conversely, "concealment" best describes the approach of the Dynamic Duopoly, who both prevent their customers from sharing discount information. This essentially means they are thwarting their loyal patrons from executing the critical verification process.
Another tactic: carriers inflate the non-discounted rates to incredibly high levels so that when discounts are applied, it appears more impressive than it really is.
Here is an example:
List rate: $1,000
Discount: 65%
Net Cost: $350
The large double-digit discount excites people but it's in fact. virtually meaningless. What is meaningful is the actual net charge of $350 and how that compares in the marketplace. Department stores deploy the same tactics. Last month I bought a $700 list price product for $250. I was very pleased, but when I performed a competitive evaluation I realized it was essentially a fair price and nothing special. The discount percentages are largely unimportant; what you end up paying is.
Your carrier's profits are going through the roof. This is America and there's nothing wrong with that. The Dynamic Duo both are incredibly well run companies that I admire and respect. My advice is designed not to interfere with the relationship you've built, just help you to pay them less. Have you seen the numbers? UPS revenue is approaching $50 billion and at FedEx, it's about $40 billion. That's billion. Their shareholders and employees thank you for your generosity. But is it your company's goal to increase what you pay them?
Conclusion: Want to increase your transportation costs this year? Accept a few points better than your previous agreement, trust your carrier, don't take the time validate and avoid optimization. Want to lower costs? Don't be fooled by high discount percentages, take steps to confirm the rates you are getting are indeed the lowest, then optimize them. I hope one day the term Glasnost will apply to shippers, but it doesn't today. You have to take control, trust no one, steer the ship to save every penny, beat the competition and grow your business!
I hope this information helps you ship better and save money!
Executives feel good when their carrier representative provides higher discount percentages in their agreement than they did the year before. As long as the discount percentage goes up a point or two, they eagerly accept the new terms. While this method may have worked years ago, it's a surefire way of increasing transportation costs today. This is because discount percentages are only one of many factors that contribute to overall cost. Old techniques are no longer effective.
Also, there's a perceived inability to shop for the best rates. Glasnost was a term used in the 80s during the Ronald Reagan years meaning "openness." President Reagan had built rapport with Russian President Michael Gorbachev. They worked together to prevent economic and world catastrophes and made agreements with one another that profoundly changed our world. But, they didn't trust each other. They publicly smiled at each other and used terms such as "Trust but verify."
Conversely, "concealment" best describes the approach of the Dynamic Duopoly, who both prevent their customers from sharing discount information. This essentially means they are thwarting their loyal patrons from executing the critical verification process.
Another tactic: carriers inflate the non-discounted rates to incredibly high levels so that when discounts are applied, it appears more impressive than it really is.
Here is an example:
List rate: $1,000
Discount: 65%
Net Cost: $350
The large double-digit discount excites people but it's in fact. virtually meaningless. What is meaningful is the actual net charge of $350 and how that compares in the marketplace. Department stores deploy the same tactics. Last month I bought a $700 list price product for $250. I was very pleased, but when I performed a competitive evaluation I realized it was essentially a fair price and nothing special. The discount percentages are largely unimportant; what you end up paying is.
Your carrier's profits are going through the roof. This is America and there's nothing wrong with that. The Dynamic Duo both are incredibly well run companies that I admire and respect. My advice is designed not to interfere with the relationship you've built, just help you to pay them less. Have you seen the numbers? UPS revenue is approaching $50 billion and at FedEx, it's about $40 billion. That's billion. Their shareholders and employees thank you for your generosity. But is it your company's goal to increase what you pay them?
Conclusion: Want to increase your transportation costs this year? Accept a few points better than your previous agreement, trust your carrier, don't take the time validate and avoid optimization. Want to lower costs? Don't be fooled by high discount percentages, take steps to confirm the rates you are getting are indeed the lowest, then optimize them. I hope one day the term Glasnost will apply to shippers, but it doesn't today. You have to take control, trust no one, steer the ship to save every penny, beat the competition and grow your business!
I hope this information helps you ship better and save money!
