Congratulations, you negotiated significant discounts from your primary small parcel carrier, and you’re ready to receive your optimum discounts, right? Well, maybe. What if we stopped to consider a few more avenues to make sure you’re getting the most out of your discounts?
To get the most from your discounts, you need to ensure that the most cost-effective service and carrier are being selected to meet your customer expectations. While business rules in your software can guide this selection, most business rules are established based on a one-time data snapshot. The problem? With all the variables in small parcel transportation, static business rules alone can’t attain 100% optimization.
That’s where AI-powered shipping and contract compliance intelligence come in. These two essential tools will help you make smarter carrier decisions, optimize costs in real time, and protect the incentives you’ve worked hard to secure.
Shipping Powered by Artificial Intelligence (AI)
AI-powered shipping tools have been trained from billions of historical shipments. It knows which carrier service will reach your customer within the committed business days and which service has the least cost. And it’s all presented to you in a microsecond, allowing you to maximize your carrier discounts while meeting your customer service commitment. Now you’re ready to receive your optimum discounts, right? Almost! Just one more step.
If you are getting the optimum discounts, how can you save more? By understanding the impact to your revenue tiers and rebates (if applicable). Think about this example: Your primary small parcel carrier has been negotiating contracts for many years, and these contracts are always written to provide an advantage to the carrier. UPS has been negotiating contracts since 1907 and FedEx since 1971— that’s 172 years of combined negotiating experience!
Carrier Advantage 1: Revenue Tiers
Carriers design revenue tiers to work in their favor. As you grow your volume with the carrier, you may see a modest bump, maybe gaining a 1.5% discount improvement per tier above your baseline. However, if you reduce your revenue with the carrier, you take a much larger hit to your discount. You could lose around 5% in discounts for each tier that falls below your baseline.
Carrier Advantage 2: Rebates
If you are an upper mid-size to large small parcel customer, the carriers will offer you quarterly or annual rebates. This gives them a strategic advantage by delaying the payout, and if you don’t achieve your revenue threshold for the time period, they can withhold the payment entirely.
AI-powered shipping can help optimize costs by suggesting a lower-cost carrier that still meets your customer’s service expectation. But shifting volume away can reduce your primary carrier revenue, potentially jeopardizing your tiered incentives or your rebates. When used wisely, AI-powered shipping is an incredible tool to optimize small parcel savings.
Contract Compliance Intelligence
You need contract compliance intelligence to understand what level of revenue you can move between carriers without negatively affecting your revenue tiers and your rebates.
You can ensure you have the contract compliance intelligence you need in two ways:
- Ongoing monitoring with SaaS: If you are more comfortable having contract compliance status at your fingertips, subscribe to a contract compliance Software as a Solution (SaaS) offering.
- Periodic assessments: If you only feel the need to validate your contract compliance on a scheduled basis, complete a thorough contract compliance snapshot assessment on a quarterly or monthly basis depending on your needs, using your staff expertise or hire a consultant if needed.
You decide which option is best for your company and your budget.
Summit Advisory Team can help by recommending the industry leading AI-powered solution and contract compliance solution that will best fit your needs. Reach out for more details.