How to negotiate with FedEx and UPS

I'm playing around with an idea I've had for sometime...that is, giving away all of my secrets, hints, tips and tricks to negotiating the absolute best deal you possibly can with FedEx and UPS for your small package shipping rates. Why would I do such a crazy, destructive thing when I have built a successful, 20 year business doing this for others? Read on to find out.

The fact of the matter is that FedEx and UPS began a strategy in 2009 to maximize the amount of money they earn from each package by monitoring performance for every service, weight and zone. This strategy is referred to as package yield and is nothing more than a systematic rate hike. Not that big of a deal in most industries were healthy competition exists. After all, if one provider of a service decides to pursue this strategy, others will tend to discount or otherwise aggressively pursue market share. That is how competition and free markets work.

In the case of the small package delivery industry, FedEx and UPS are the only providers of global service. Most businesses that have a need for these types of services do not consider the US Postal Service (USPS) a viable option and DHL Express ceased domestic US delivery service in late 2008. Not that big of a deal, really, if you believe that FedEx and UPS are fierce competitors and vying for market share. But if their focus is revenue yield management and both can make huge amounts of money by moving their prices higher with no other options for the market, then market share becomes irrelevant.

Something else happened around the time FedEx and UPS announced a yield management strategy. They both announced, nearly simultaneously, that they will stop working with third party negotiators (3PN) who are consultants representing shippers in negotiations. I am the CEO the 3PN PA & Associates. My team and I have balanced the ability of educating our prospects and clients on small package spend management techniques with giving away too much information that our prospects never return and attempt to negotiate on their own...many times without being well-versed in all that they need to know about how to effectively do this.

It is my personal belief that the duopoly (some would call it an oligopoly) that exists in this industry needs reform. We are on the right track in bringing this matter to light; an antitrust lawsuit has been filed against FedEx and UPS and an independent investigation is being conducted by the US Department of Justice. However, these are very large companies with deep pockets and good attorneys. Significant reform could be a ways off.

The goal for now and the immediate foreseeable future is to give you the tools, techniques and roadmap to live within this less-than-ideal environment. I have lots of other ways of earning a living. I'd like to see every shipper have what they deserve; a competitive pricing agreement and a way of keeping their service providers accountable.

So this is my first lens on the topic. I will monitor how successful this is and your feedback. If it goes well, I will publish more lenses including how to write an effective Request for Proposal (RFP), how to learn more about your shipping profile than the carriers, what to ask for in a negotiation and even how to know what the market is paying (benchmarking).