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

by | Dec 14, 2020

3 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. 

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
Topics

Check out related resources at Sifted.

Monumental Rate Hikes: 2023 FedEx General Rate Increase (GRI) Analysis

Monumental Rate Hikes: 2023 FedEx General Rate Increase (GRI) Analysis

Another year of record-breaking carrier increases. FedEx just released a 6.9% 2023 General Rate Increase (GRI). ...
Read More >
Improving Inventory Accuracy: It’s Not as Difficult as You Think

Improving Inventory Accuracy: It’s Not as Difficult as You Think

What is inventory accuracy? Inventory accuracy is a metric that shows the difference between the amount of ...
Read More >
Everything You Need to Know About Parcel Shipping vs. Freight Shipping

Everything You Need to Know About Parcel Shipping vs. Freight Shipping

What is the definition of parcel? 59 million parcels are shipped daily in the United States alone, with numerous ...
Read More >
5 Ways Manufacturers Can Future-Proof Their Network for Greater Efficiency

5 Ways Manufacturers Can Future-Proof Their Network for Greater Efficiency

Over the past year, manufacturers’ durable goods shipments have risen by almost 12%, and new orders are up by 11%. ...
Read More >
How Same-day Delivery is Revolutionizing Parcel Logistics

How Same-day Delivery is Revolutionizing Parcel Logistics

Brief History of Parcel Logistics For thousands of years, goods transportation has played an important role in ...
Read More >
7 Parcel Shipping Companies: What’s Best for Your Business?

7 Parcel Shipping Companies: What’s Best for Your Business?

Things to Consider for Parcel Shipping Companies When it comes to selling online, finding the best parcel shipping ...
Read More >
Just How Bad Will 2023 General Rate Increases Be? Here Are Our Top Predictions

Just How Bad Will 2023 General Rate Increases Be? Here Are Our Top Predictions

Inflation, labor shortages, high fuel costs, and unprecedented demand for shipping capacity will all play a role ...
Read More >
When to Use Regional Parcel Carriers

When to Use Regional Parcel Carriers

Disruptions in the Parcel Sector The COVID-19 pandemic led to vast eCommerce supply chain and delivery service ...
Read More >
How Zone Skipping Can Transform Your Parcel Fulfillment Strategy

How Zone Skipping Can Transform Your Parcel Fulfillment Strategy

What is zone skipping? The high shipping cost of cross-country shipping is one of the biggest problems for ...
Read More >
6 Companies Innovating Eco-Friendly Packaging

6 Companies Innovating Eco-Friendly Packaging

What is considered sustainable packaging? Sustainable packaging uses packaging composed of materials that have a ...
Read More >
Everything You Need to Know About 4PLs

Everything You Need to Know About 4PLs

What is fourth-party logistics (4PL)? A 4PL or fourth-party logistics provider also referred to as a lead ...
Read More >
2022 Peak Season Surcharge Guide [FedEx, UPS, USPS, & Amazon]

2022 Peak Season Surcharge Guide [FedEx, UPS, USPS, & Amazon]

Christmas in…September? FedEx is making fast moves this year with their early Peak Season release. Some charges ...
Read More >

How Sifted Works

Connect to
your account

Sync
your data

Power your
dashboards

Get Your Logistics
Intelligence Demo

Strategic ways to prevent loss down the line

Services you could be utilizing right now for savings

Ways to cut material costs without cutting quality

Are you an FBM (fulfillment by merchant) Amazon seller?

Check out our Marketplace Intelligence solutions to protect your bottom line.

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

Seller Insights
Measure and monitor with confidence.

Sales Visualization
Shed new light on your sales data.

Cost Impact Analyzer
Understand the impact of ever-changing FBA fees.

FBA Audit & Recovery
Secure money you’re owed from Amazon.

Blog
Discover news, tips, and industry best practices

DIM Weight Calculator
See how DIM is impacting you

Customer Stories
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

Logistics Intelligence
For parcel shippers

Marketplace Intelligence
For Amazon FBA sellers