A recent article by Michael Ryan in Parcel Magazine(and referenced last week on our blog) provides great insight into a trend I’ve seen in the parcel industry, that of consultant, or “third-party” avoidance.
FedEx and UPS have always been adverse to any discussion surrounding rate negotiations (what supplier isn’t?). In past years, the standard play would be for FedEx and UPS to use DHL as an excuse to disqualify requests for pricing concessions during an RFP or latter stage negotiation. They would posture that DHL couldn’t handle the business, that their service levels aren’t there, or that they might not last another year.
To some extent, the big two were right, and eventually they won that battle. DHL, the low price leader, exited the domestic market and tariff rates from both UPS and FedEx have shot up substantially since (2010 alone will see base tariff rates increases of 6-7%!).
Now that DHL is gone, UPS and FedEx are taking aim at their next biggest perceived threat, consultants, or what they like to call “third parties”. In the course of the last year, several parcel projects I’ve worked on have had the incumbent supplier attempt to cancel the project by threatening to terminate their relationship with the shipper (our mutual customer). Their rationale includes everything from, “we prefer to negotiate directly with our customer” to “we have a policy of not working with third parties” to “it’s not fair to us or the customer for you to be involved”. While the article referenced above does a great job providing a counter to these arguments, the fact is, UPS and FedEx will continue to look for ways to disengage from consultants.
So what are we “third parties” to do?
The main thing is to build strong sponsorship at the customer level. Each time the carrier tells a customer they are going to terminate, they are hoping the customer will blink, and in many cases that customer will. After all, why upset the applecart?
As a consultant, we have to call the play before the carrier. Tell the customer what to expect before starting a parcel project. First, the shipper will request a three way NDA. Their hope is the NDA will land in legal, changes will be made, and that process stalls for a month or more. Next, the carrier will try to end around the process, telling the customer they would prefer a direct negotiation, that the consultant doesn’t understand their business, or that the situation is not fair. If they are feeling particularly lucky, the next step will be to inform the customer that they’ve been told by “someone” in management that they must issue a letter of cancellation if the third party is not disengaged.
Telling a customer all this up front might scare them into cancelling the project, but if that’s the case sponsorship was probably weak anyway. Most customers will still engage, and have a good time laughing as they see the carrier run those plays. FYI – the carriers will eventually back down if the customer holds their ground.
The bad news is that the carriers have the mantra down, and they are going to keep running this play for awhile. The good news is, if you keep your customer informed, you can run a successful block.
FedEx and UPS have always been adverse to any discussion surrounding rate negotiations (what supplier isn’t?). In past years, the standard play would be for FedEx and UPS to use DHL as an excuse to disqualify requests for pricing concessions during an RFP or latter stage negotiation. They would posture that DHL couldn’t handle the business, that their service levels aren’t there, or that they might not last another year.
To some extent, the big two were right, and eventually they won that battle. DHL, the low price leader, exited the domestic market and tariff rates from both UPS and FedEx have shot up substantially since (2010 alone will see base tariff rates increases of 6-7%!).
Now that DHL is gone, UPS and FedEx are taking aim at their next biggest perceived threat, consultants, or what they like to call “third parties”. In the course of the last year, several parcel projects I’ve worked on have had the incumbent supplier attempt to cancel the project by threatening to terminate their relationship with the shipper (our mutual customer). Their rationale includes everything from, “we prefer to negotiate directly with our customer” to “we have a policy of not working with third parties” to “it’s not fair to us or the customer for you to be involved”. While the article referenced above does a great job providing a counter to these arguments, the fact is, UPS and FedEx will continue to look for ways to disengage from consultants.
So what are we “third parties” to do?
The main thing is to build strong sponsorship at the customer level. Each time the carrier tells a customer they are going to terminate, they are hoping the customer will blink, and in many cases that customer will. After all, why upset the applecart?
As a consultant, we have to call the play before the carrier. Tell the customer what to expect before starting a parcel project. First, the shipper will request a three way NDA. Their hope is the NDA will land in legal, changes will be made, and that process stalls for a month or more. Next, the carrier will try to end around the process, telling the customer they would prefer a direct negotiation, that the consultant doesn’t understand their business, or that the situation is not fair. If they are feeling particularly lucky, the next step will be to inform the customer that they’ve been told by “someone” in management that they must issue a letter of cancellation if the third party is not disengaged.
Telling a customer all this up front might scare them into cancelling the project, but if that’s the case sponsorship was probably weak anyway. Most customers will still engage, and have a good time laughing as they see the carrier run those plays. FYI – the carriers will eventually back down if the customer holds their ground.
The bad news is that the carriers have the mantra down, and they are going to keep running this play for awhile. The good news is, if you keep your customer informed, you can run a successful block.
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