For parcel shippers, managing their own affairs with industry giants FedEx Corp. and UPS Inc. can be akin to bringing a knife to a gunfight. The mega-carriers have unmatched resources and knowledge, and bring them to battle every day. Even big shippers with deep pockets and decades of experience are too consumed with running their businesses to effectively oversee their day-to-day carrier relationships. Because most contracts run three years, it’s easy for shippers to let key issues fall through the cracks until it’s too late.

That’s where parcel consultants come in. Formed by former carrier sales and pricing executives, or by parcel invoice auditors who leveraged shipping data to help businesses with rates and contracts, the firms have been part of the parcel-delivery fabric since the early 1990s. They remain in demand because they keep regular tabs on their shipper clients and the carriers, and can push for adjustments to a contract’s terms and conditions while it is still in force. Consultants possess critical carrier benchmarking intelligence their clients don’t. Consultants’ ultimate value is that their recommendations can save their clients bundles of money without impairing their service levels. 

Consultants provide shippers with a no-cost, front-end analysis on making the most of their parcel spend, though the depth of the analyses can vary depending on the client and the consultant. Cost savings, which can sometimes total in the millions of dollars, are shared by the client and consultant. The “cost-sharing” ratio is often 50-50, but consultants might get less than half in return for a bigger payday if the client and the dollar savings are huge.

For parcel consultants, business has never been better. Delivery demand has gone through the roof over the past 18 months, and is expected to stay elevated for years to come. FedEx and, in particular, UPS, are raising rates on big customers and adopting a take-it-or-leave it mindset, thus forcing shippers to look elsewhere for service and to seek help in finding it. 

More companies are doing business on-line, which translates into more delivery activity and more opportunities for consultants to ply their trade. There has been much back-channel buzz over the past year of mergers, acquisitions or combinations of and between consultancies. Transportation Insight LLC, a multi-modal consultant and lead logistics provider, in January acquired Spend Management Experts to beef up its parcel consulting capabilities.

Small to midsize businesses (SMB), which FedEx and UPS have prioritized because these shippers generally use more of their services and will pay top dollar for them, present another area of expansion for consultants, practically all of whom already serve the SMB segment.

“Companies who ship at least 50,000 packages annually with one primary carrier may have enough volume and spending to benefit from improved carrier contract terms and/or sourcing with alternative carriers,” said Nate Skiver, founder of LPF Spend Management. Consultants can also develop e-commerce shipping strategies that are critical for SMBs to differentiate their value propositions from larger competitors, Skiver said.

FedEx (NYSE:FDX) and UPS (NYSE:UPS) have made life good for consultants through their own behavior. Benchmarking data, which is commonplace in other sectors of transportation, is generally unavailable in the parcel segment because the carriers are too secretive to allow it, said Mike Erickson, founder of AFMS LLC, which was established in 1992 and is considered the consulting industry’s patriarch. “Getting good intelligence is critical” especially since it’s not forthcoming from the carriers, Erickson said.

In theory, a shipper should know more about its business than its carriers. In practice, however, that doesn’t happen. That’s because the carriers are able to capture detailed package data that’s beyond the reach or the understanding of most customers, said Rob Martinez, founder and co-CEO of Shipware LLC, a consultancy. “Most shippers do not have enough access to this information, or they don’t know how to evaluate it properly,” Martinez said.

Carriers also send shippers fleeing into the arms of consultants with dense and complex contracts that contain opaque pricing language with overlooked gotchas, said Erickson. “Parcel contracts are by far the most complicated in all of transportation,” he said.

Then there are the manual entry errors that result in double-billings, incorrect charges and the like, mistakes that are inevitable at large and complex enterprises like FedEx and UPS, but which shippers may be unaware of until their consultants point them out. 

Carriers don’t relish working with consultants, especially since they are using the carriers’ tools against them. Over the past decade or so, FedEx and UPS have sought to blunt the consultants’ impact by keeping them away from the contract negotiating table, forcing shippers and consultants to sign three-way non-disclosure agreements, and allegedly colluding against consultants. AFMS sued FedEx and UPS about a dozen years ago, alleging the carriers violated antitrust laws by colluding in an effort to drive the firm out of business. After a decade-long legal battle, the suit was dismissed. AFMS remains very much alive, however.

Consultants are not shy in promoting their successes.

“We market ourselves pretty hard,” Erickson said. Last week, consultancy Green Mountain Technology published a report touting that it had saved an unidentified mulit-national retailer $55 million by uncovering a carrier-billing error. Shipware said it saves shippers, on average, nearly 20% through contract optimization, 7% to 15% weekly savings through its invoice-auditing services, and 20% to 30% savings in recommending cheaper delivery services that still meet the customer’s delivery requirements. Erickson said AFMS’ audits typically yield 1% to 3% savings based on a shipper’s typical spend.

Consultants are partners, not nursemaids. Their objective is to arm shippers with the best intelligence to make well-informed decisions. The shipper must then carry the ball. Jey Yokeley, executive director of parcel solutions for consultancy TransImpact, said the key in parcel negotiations — as it is in practically all bargaining–is for both sides to feel they’ve won.

“Carriers can easily look at your shipment volume and know their cost to service your business,” said Yokeley. “The opportunity for shippers is to understand what those carrier costs are and then negotiate with that knowledge.”

Having this intelligence allows the shipper to “negotiate, on a lane-by-lane basis, rates that allow the carrier to make a small but sustainable margin on each shipment,” Yokeley said. “This approach guarantees [the shipper’s] rates are tightly in line with carrier costs and the real market rates for every shipment. It also builds a stable carrier portfolio that will attract higher-quality partners and improve service to your customers.”

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