30-Minute Sifted Group Demo Register 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.

11/27/23 Parcel News Update

11/27/23 Parcel News Update

1. Amazon’s Volumes Surpass FedEx and UPS Amazon delivered more parcels in 2022 than UPS, according to internal ...
Read More
11/20/23 Parcel News Update

11/20/23 Parcel News Update

1. USPS Announces Tentative Rate Increases for 2024 The United States Postal Service has announced rate increases ...
Read More
11/13/23 Parcel News Update

11/13/23 Parcel News Update

1. Experts Share Attention-Grabbing Items from 2024 GRIs Supply Chain Dive interviewed industry experts, including ...
Read More
2023 Holiday Shipping Deadlines

2023 Holiday Shipping Deadlines

It’s the most wonderful time of the year? It will be if your customers receive their orders on time. The major ...
Read More
11/6/23 Parcel News Update

11/6/23 Parcel News Update

1. FedEx Encourages Pilots to Find New Work According to a memo, FedEx Express is “significantly overstaffed” and ...
Read More
10/30/23 Parcel News Update

10/30/23 Parcel News Update

1. UPS Recaptures 40% of Volume Lost to Strike Fears Last week, UPS shared that they lost roughly 1.5 million ...
Read More
What’s Next for Shippers: 2024 FedEx & UPS GRI Analysis

What’s Next for Shippers: 2024 FedEx & UPS GRI Analysis

It’s General Rate Increase (GRI) season once again. In true duopoly fashion, FedEx and UPS have announced the same ...
Read More
10/23/23 Parcel News Update

10/23/23 Parcel News Update

1. FedEx Announces Deadlines for Holiday Shipments FedEx has published dates that domestic packages must be sent ...
Read More
10/16/23 Parcel News Update

10/16/23 Parcel News Update

1. UPS Releases Full 2024 GRI Over the weekend, UPS published their 2024 General Rate Increase (GRI). An average ...
Read More
10/9/23 Parcel News Update

10/9/23 Parcel News Update

1. Peak Season Brings Hiring Goals for Carriers With Peak Season around the corner, carriers are ramping up hiring ...
Read More
PARCEL Forum 2023: Key Takeaways and Insights

PARCEL Forum 2023: Key Takeaways and Insights

A few weeks ago, PARCEL Forum brought logistics professionals from around the industry to Nashville. They ...
Read More
10/2/23 Parcel News Update

10/2/23 Parcel News Update

1. UPS Offering Rebates for Shippers Leaving Other Carriers After losing volume to rival carriers during the ...
Read More

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.

Fee 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

Podcast
Hear from industry experts on LeaderShipping

Customer Stories
Learn how other brands use
Logistics Intelligence

Carbon Calculator
Calculate your CO2 Emissions

Thought Leaders
Meet the people behind the technology

Guides
Download free reports and expert how-tos

Demo
Get a personalized tour of our software

About Sifted
Get to know Logistics Intelligence

Logistics Intelligence
For parcel shippers

Marketplace Intelligence
For Amazon FBA sellers

Let's get you to the right place!

SIFTED DASHBOARDS
For parcel shippers

AMAZON Marketplace Intelligence

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