Quarterly Live Group Demo Watch Now

Sifted logo

Shipper & Carrier Agreement vs Contract: What’s the Difference?

by Caleb Nelson

Dec 14, 2020

5 min read

One conversation that comes up over and over in my chats with shippers is about their carrier contracts. And most shippers are surprised to learn that their deal with their carrier is not a contract at all — it’s an agreement.

What’s the difference? An agreement is less formal and binding — both of you can make changes at any time. A contract has locked-in terms, start and end dates, and other commitments. An agreement is a formal understanding that you’ll work together, barring certain issues and events.

 

What Is a Carrier Agreement?

A carrier agreement is a documented promise between a shipper and a carrier that the shipper will use the carrier’s services in exchange for a discount on those services. A shipper of any size will typically have an agreement with at least one carrier to reduce their shipping costs.

 

What Is in a Carrier Agreement?

A typical carrier agreement will contain the rates for carrier services, including any discounts and minimum charges that the shipper can expect. It will also contain language from the carrier restricting certain practices and activities. They are usually highly complex with many caveats and conditions that will affect every package you send differently, so it’s crucial to make sure you understand all the details.

 

How Often Should You Optimize a Carrier Agreement?

While a full optimization is only needed once a year, you should be tweaking your carrier agreement in response to carrier pricing changes four to six times a year. By doing this, you’ll keep the value of your discounts as close as possible to what you optimized.

2020 has brought historic (and rapidly occurring) changes for shippers to contend with, including suspended service guarantees and a double whammy of peak surcharges for both pandemic-related shipping and the 2020 holiday season. Not to mention an overrun shipping network.

How have these changes affected your shipping spend? Is your effective discount still what you thought it was? Do you know what your effective discount is?

The fact is that your carrier can change your pricing at any time because, again, you have an agreement, not a contract. But that means you can ask for changes at any time as well.

FBA vs FBM

10 Ways to Future-Proof Your Business

How Should You Approach Your Carrier About Adjusting Your Carrier Agreement?

Don’t make a move without all the information you need to make a strong case. Ensure you have your latest data and trends in hand — not last quarter’s or even last month’s.

Then make sure you know how it impacts your spend and what needs to change to get your pricing closer to what you optimized. Contact your rep and work with them to adjust the agreement to reflect what’s happening in your business (and theirs) today.

 

Careful Observation of Your Data Keeps Your Spend Down

Smaller shippers are often too overwhelmed by the daily grind of running their business to keep up with their shipping data, while larger shippers might find that the sheer volume of their data makes it difficult to work with and interpret. But to maintain a strong discount and keep your shipping spend down, it’s imperative to understand your data — and be able to act on it — at all times.

Before you optimize, make sure you have all the information you need about surcharges. Find it in our eBook, 5 Budget-Busting Surcharges & How to Lower Them.

Topics: Carrier Optimization, Contract Optimization

Caleb Nelson

Caleb is the Chief Growth Officer and a Sifted co-founder. He drives Sifted’s strategic and operational initiatives forward. With 17+ years of experience at companies like Unishippers, Caleb has become a go-to resource for parcel businesses. Connect with Caleb on LinkedIn here.
Topics

Check out related resources at Sifted.

PARCEL Forum 2024: Key Takeaways and Insights

PARCEL Forum 2024: Key Takeaways and Insights

In September, PARCEL Forum ‘24 brought top professionals from the small-package industry to Dallas. They discussed ...
Read More
Unpacking the (True) Impact: 2025 FedEx GRI Analysis

Unpacking the (True) Impact: 2025 FedEx GRI Analysis

As the summer temperatures start to cool down, the shipping world heats up. Peak season looms. Demand surcharges ...
Read More
Supply Chain Contingency Planning: Using Logistics Intelligence To Mitigate Risks

Supply Chain Contingency Planning: Using Logistics Intelligence To Mitigate Risks

Globalization is slowing down, and the world is doing everything to fix it and reduce modern-day supply chain ...
Read More
2024 FedEx & UPS Demand (Peak Season) Surcharge Guide

2024 FedEx & UPS Demand (Peak Season) Surcharge Guide

Please note: This article focuses on Ground and Express charges. For a full breakdown of international and other ...
Read More
The 2025 General Rate Increase (GRI) is Coming… What We Expect and How to Prepare

The 2025 General Rate Increase (GRI) is Coming… What We Expect and How to Prepare

As the 2025 General Rate Increase (GRI) approaches, businesses across industries are bracing for the potential ...
Read More
Invoice Auditing 101: How to Audit FedEx & UPS Invoices Accurately

Invoice Auditing 101: How to Audit FedEx & UPS Invoices Accurately

Did you know that on select days annually, both FedEx and UPS pause their money-back guarantees? These blackout ...
Read More
PARCEL Forum ’24 – Sifted’s Roundup

PARCEL Forum ’24 – Sifted’s Roundup

This September, the supply chain’s leading experts will converge in Texas for PARCEL Forum ‘24, the premier ...
Read More
Network Optimization 101: The Impact of Carrier Diversification on Supply Chain Resilience

Network Optimization 101: The Impact of Carrier Diversification on Supply Chain Resilience

FedEx and UPS had the same GRI for 2024 at 5.9%. Down 1% from 2023’s 6.9% increase. American businesses are facing ...
Read More
How To Implement Artificial Intelligence To Boost Your Supply Chain Operations

How To Implement Artificial Intelligence To Boost Your Supply Chain Operations

By 2027, the global last-mile delivery market is expected to soar past $200 billion, up from $108.1 billion in ...
Read More
How Amazon Is Using AI To Become the Fastest Supply Chain in the World

How Amazon Is Using AI To Become the Fastest Supply Chain in the World

Did you know that Amazon has been using machine learning and AI for more than 25 years? Yes, 25 years! That’s ...
Read More
Survey: Consumer Home Delivery Preferences

Survey: Consumer Home Delivery Preferences

In the eCommerce landscape, the way brands interact with their customers is evolving. While optimized store ...
Read More
How to Evaluate Carrier Performance Across Diverse Networks

How to Evaluate Carrier Performance Across Diverse Networks

Carrier Diversification allows businesses to: 1.  Compare and choose the most cost-effective shipping rates. 2.  ...
Read More

Shipping Insights & Alerts
Get updates and track the things impacting your business most

Decision Support
See how supply chain adjustments pay off before you pay out

Carrier Management
Streamline how you manage your carrier operations and contracts

Business Automation
Let software do what it does better than people can

Blog
Discover news, tips, and industry best practices

DIM Weight Calculator
See how DIM is impacting you

Podcast
Hear from industry experts on LeaderShipping

Case Studies
Learn how other brands use
Logistics Intelligence

Carbon Calculator
Calculate your CO2 Emissions

Guides
Download free reports and
expert how-tos

Demo
Get a personalized tour of our software

About Sifted
Get to know Logistics Intelligence

Unboxed Newsletter
Subscribe for parcel news, predictions & tips

Logistics Intelligence
For parcel shippers

Let's get you to the right place!

SIFTED DASHBOARDS
For parcel shippers

AMAZON
Redirect to Valence Intelligence Login

Not sure if you have an account? Email [email protected].