Progressive Distributor - Spending less green with brown

Spending less green with brown

NAHAD Small Parcel Value Program helps members lower their UPS bills

by Rich Vurva

A new Small Parcel Value Program from NAHAD is helping members lower their small package freight bills each month. The affiliation program with Integrated Shipping Solutions Inc. of Brookfield, Wis., has enabled some NAHAD members to achieve double-digit shipping discounts.

ISS was founded by two former UPS account executives familiar with rate and discount structures used by small parcel carriers such as UPS, FedEx and DHL. NAHAD members sign an agreement allowing ISS to take over the negotiation process and establish a request for proposal (RFP) with the three major small parcel shippers.

“At that point, we go to UPS, FedEx and DHL and set up an RFP process, however, we also supply them with discount guidelines they need to come back with to be competitive,” says ISS president Derrick Olson.

Distributors choose which carrier they prefer to do business with. Olson says nine out of 10 customers remain with their incumbent carrier after involving ISS.

The negotiation process lasts about two weeks. ISS typically negotiates one to three-year agreements. The company bills customers for 50 percent of the additional annual savings realized in the first year.

“At the end of every month, our customers fax their four carrier invoices for the month to us, and we calculate the difference between their old deal and their new deal. If they saved $500 this month, they keep $250 and pay us $250,” says ISS vice president Brett Stubblefield.

ISS can negotiate more attractive discounts than the typical distributor because of their knowledge of the UPS rate structure and discount schedule, Stubblefield says.

“We know how their pricing model works. We know the discount thresholds for various service levels and revenue levels. The customer has no frame of reference. They have to take the carrier’s word for it,” he says.

NAHAD member savings
NAHAD member Jack Kacsur of General Rubber Company in Milwaukee says he negotiated a 7 percent discount with UPS before he heard about ISS. But he learned the discount did not affect incoming shipments and also didn’t apply to other special pricing programs, so his actual discount was closer to 2 percent.

“Like a lot of companies, I had been experiencing escalating freight costs. We use UPS pretty much exclusively. Every year it would keep going up,” says Kacsur.

After agreeing to allow ISS to negotiate a new contract with three small package carriers on his company’s behalf, his shipping costs have dropped dramatically.

“ISS is saving my company over 13 percent on my UPS bill,” Kacsur says.

Stubblefield says the company’s niche is small to medium-sized companies with small parcel shipping costs of $20,000 to $5 million a year. Larger companies typically can negotiate competitive discounts on their own.

Value Added Distributors of Shawano, Wis., spends about $250,000 with UPS each year, according to operations manager Tim Horn. He had been eyeing ways to reduce the company’s freight costs.

“As our company grew, I saw how much our shipping costs were going up. Our customers won’t pay freight because they see it as a cost too. So, we realized we needed to look at how to get those costs down,” he says.

Horn says ISS negotiated a discount three to four times larger than the discount he obtained on his own.

“It can’t hurt to have someone review what you already have. There was no startup fee. They get paid if they save us money,” Horn says.

Free analysis
ISS provides free analysis to NAHAD members to determine if the company can reduce their shipping costs. Customers provide ISS with one full shipping invoice and the front page of their 10 most recent invoices to complete an analysis.

“If we know someone already has a competitive discount, we’ll decide not to take on a customer. We have turned people away because we knew we could only get them an additional two or three percent. They don’t need our assistance,” Olson says.

Merrill Johnston of Hydro Hose in Tupelo, Miss., says his company spends about $40,000 with UPS annually.

“We contacted ISS and they reviewed what we were doing and the discount we were getting. Through their expertise and knowledge of the UPS rate structure, they were able to increase our discount by about 50 percent. That was a pretty good shot in the arm,” Johnston says.

He says the process was simple to follow and only requires a little of his time to review the monthly invoices.

“It’s an absolute win-win as far as I’m concerned. I would recommend that other NAHAD distributors look into it,” he says.