Expenses, service inconsistencies, and compliance risks can quickly erode ecommerce shipping operators’ profit margins and customer satisfaction. Without sufficient oversight of how your mix of carriers operates, your business can miss out on potential cost-saving opportunities, not to mention open itself up to potential legal liabilities.
Effective carrier contract management optimizes shipping operations, reduces costs, and ensures reliable service. Let’s explore the key strategies and benefits for properly managing the terms and conditions of your carrier relationships.
Key takeaways:
A strategic undertaking toward carrier contract negotiation can help shippers secure favorable terms, minimize costs, and improve service quality. Here are 3 actionable steps to negotiate these documents:
Carriers are more likely to offer discounts and favorable rates if they see value in your shipping volume. Use historical data to demonstrate consistent or high shipment volumes and negotiate rates accordingly. Highlight areas like predictable routes, regular loads, and minimal idle capacity to strengthen your case.
Clearly define SLAs in your contract, such as on-time delivery percentages, transit times, and damage-free requirements. These metrics enable partners to align with your operational needs and meet carrier performance expectations.
Business needs can change, and your carrier contract optimization should ensure adaptability. Negotiate clauses that accommodate:
Read our complete guide on the topic: Negotiating carrier rates.
After reaching an agreement, the focus shifts to implementing the carrier contract effectively and ensuring the partnership delivers optimal results. Here’s how to do it in five steps:
This phase ensures both parties are aligned in terms of communication, technology, and operational workflows.
Proper onboarding is crucial to align your carrier with your unique operational needs and compliance requirements. Ensure the carrier understands your delivery expectations, preferred routes, and any special handling needs to meet customer requirements.
Trial shipments are a critical step in evaluating the carrier’s readiness and identifying any operational gaps. This helps build confidence in their ability to meet your standards.
Establishing a framework for tracking carrier contract performance ensures accountability and provides actionable insights for improvement. A data-driven approach helps maintain service levels and cost control.
This stage ensures both parties can adapt and optimize as business needs evolve. However, if a carrier consistently underperforms despite efforts, it may be time to consider contract termination.
By managing carrier contracts effectively, businesses can unlock significant value in their supply chain operations. Let’s explore these five key benefits of a robust management strategy.
Streamlining carrier contract management can increase operational efficiency and reduce expenses. A well-defined process can also improve customer experience by facilitating consistent refinement of fulfillment operations.
Shippers who enhance the way they manage carrier agreements experience savings through:
Employing carrier contract management software, like Green Mountain, when combined with an end-to-end platform like Shipium, can help ensure your strategies translate to bottom-line savings by:
Better carrier management can help you evaluate and improve the overall quality of your operations, providing the insights and feedback loops necessary to optimize your logistic process.
With a clear and robust solution in place, you get:
With a system in place for managing the existing contracts within your network, you can ensure your operations stay malleable enough to pivot along with the growing demands of your business and your customers.
Enhancements include:
An optimized process for managing your carrier network helps you offer better delivery time promises. Using Shipium, for example, ecommerce brands can provide accurate promises before their customers even click the buy-now button, resulting in a cart conversion rate improvement of 4% on average, according to a Nucleus report.
Carrier contracts detail the process for addressing potential legal issues, such as carriers violating hours-of-service regulations or failing to maintain proper hazardous materials documentation. Violations of federal hazardous materials regulations, for example, can result in maximum fines of up to $500,000.00 for corporations.
Proper management of contract terms protects you, providing:
Beyond legal considerations, effective carrier management also mitigates operational risks, optimizing spending across diverse shipping scenarios. For example, a Green Mountain case study showed that a shipper facing a 15% contract increase with their primary carrier used the software’s intelligent planning to diversify their network, resulting in $5.5 million in savings.
The key to an optimized logistics process is access to insights that allow you to make data-driven decisions. Adopting a carrier management system that automates the process of handling your contracts gives you:
Explore how data-driven, closed-loop parcel fulfillment enables informed decision-making about your supply chain.
The Shipium platform’s multi-carrier parcel management — combined with Green Mountain’s carrier contract management software and strategic relationships — makes it easy for ecommerce businesses to simplify their shipping operations. In fact, when switching to Shipium from a legacy platform, users see a cost reduction of up to 24% on shipments delivered in 3 days or less.
With Shipium, you can unify your existing systems and intelligently move your orders through your supply chain. Fulfillment Engine automates the process of selecting the optimal warehouse and carrier for each shipment, increasing the speed and accuracy of your deliveries.
Book a demo today and explore how Shipium and Green Mountain can help enhance your carrier contract management.
A carrier contract is a legally binding agreement between a shipper and a transportation services provider outlining the terms for freight services. It typically specifies freight rates, service levels, liability, insurance requirements, and operational procedures. These contracts establish clear expectations and protect both parties' interests.
They typically include the following components:
Common carrier delivery services serve the general public, accepting any paying customer. Examples include trucking companies, airlines, and taxis. Contract carriers, however, operate under specific agreements with select clients, offering customized solutions. Examples include dedicated freight services and private logistics firms serving particular businesses.
See the table for their main differences:
|
Features |
Contract Carrier |
Common Carrier |
|
Service scope |
Exclusive to contracted clients |
Open to public users |
|
Cost |
Customized pricing |
Standardized rate |
|
Flexibility |
High (tailored to business needs) |
Low |
After negotiating rates, managing contractual carriers adequately can strengthen partnerships and help streamline processes. Best practices for managing your network include: