Mike Regan, president of Tranzact Technologies, a freight payment company, says every shipper believes it is absolutely, positively getting the best rate and biggest discount from its parcel carriers. "Every shipper has the best rates in the world, according to the incumbent carrier they are talking to at that moment," he says.

Because Tranzact audits and pays freight bills for many different shippers, Regan sees graphic proof that their belief is mistaken. He often consults with Tranzact's customers on how they can obtain better parcel rates.

The biggest thing shippers need to do to get better rates is thoroughly understand their business and how it matches up with what carriers are looking for, Regan says. It helps to know how express carriers "rate" shippers in terms of profitability, ease of shipment, payment ability, and other factors.

Michael Erickson, president and CEO of consulting firm AFMS, is a former Airborne Express executive. He knows the express parcel industry from both sides of the street. According to Erickson, parcel carriers divide their customers into three general groupings that reflect pricing strategies:

Retention. These are shippers that carriers largely take for granted because they have little fear they will leave. Hence, they get the lowest discounts.

Penetration. These shippers give only half their business to any single carrier, thus creating fear that they could jump ship. Their discounts usually are larger.

Conversion. These are "four star" customers who get the best rates, the biggest perks, and the largest discounts. Carriers fear losing these accounts and work the hardest to retain them. Hence, they receive double-digit discounts as well as perks such as trips to the Olympics and football games.

"Each carrier classifies them a little differently, but in general they fall into those three categories," Erickson says.

Shippers can become more attractive customers in order to get lower parcel rates, Regan says. For example, they can sort and segregate shipments themselves, or consolidate small, frequent orders into larger bulk shipments. Or they can negotiate away money-back guarantees in exchange for reduced rates, a move that could lead to seven-figure savings on very large contracts, he says.

If parcel carriers are able to offer ground service with transit times of one or two days, says Erickson, it usually is worthwhile for shippers to move that business over the road. "Ground has become so reliable, why ship air?" he asks. Depending on the day of the week, second-day air shipments often move by ground anyway, so there's no sense in paying extra for air, he adds.

Using transportation and rate management technology can help shippers analyze the most economical way to move their parcels. "The technology has changed a lot in the last five years to allow shippers to become smarter," Erickson says.

Finally, Regan suggests, shippers can benefit from being inventive. "If you continue to do business as you've always done business, why would you expect anything but further increases?" he asks. "If you want to mitigate future increases, you need to really understand how you do business, and look outside the box."

—John D. Schulz