UPS' tips for maximizing carrier agreements

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To make the most of any agreement, UPS recommends the following for shippers as they enter discussions with carriers.

Invest in good preparation

• Because rate agreements are based on shipping characteristics and volume, it's critical to prepare accurate RFPs for carriers to analyze.

• It's a good investment of time and energy to conduct a thorough review of your current volume and spend as well as your future volume projections.

• Accurate volume projections are essential. A volume projection that's too low can reduce the incentive you negotiate, and a projection that's too high can result in time-consuming re-negotiations down the road. Additionally, over-projections can cause budgeting issues because the shipper will not receive the agreed upon incentives.

Assess your assessorials

• Carefully consider your need for assessorials and use them wisely. These services represent a large cost to carriers that must be passed on to the shipper.

• For example, do you really need "Adult Signature Required," or would "Signature Required" service suffice?

• Are you incurring special handling charges for shipments that are not packaged? Consider boxing everything you can to eliminate these charges. A $1 box is a better use of resources than a special handling charge that might be four or five times that amount.

• Is a three-attempt return service such as UPS RS3 worth the extra expense, or would a one-attempt (UPS RS1) work well?

• Ensure your packaging is not too large for the product to avoid unnecessary dimensional or oversize charges. If necessary, consult a packaging lab.

Understand the carrier's financials, not just your own

• Carefully consider the overall financial strength of a carrier when entering a long-term agreement. Should the carrier run into dire financial difficulties, the shipper could be left with undelivered packages to customers.

• Can you afford to switch if the carrier goes bankrupt? Can you afford the lost business from stranded packages?

Use good "dollar sense"

• Don't just focus on the percentage of incentives offered by carriers. While one carrier might offer a better incentive percentage, those discounts could be on higher base rates.

• The only answer is to calculate the bottom-line dollars you will spend with each carrier to derive an accurate comparison.

Calculate cost versus reliability

• Bottom-line cost is important, but also consider the cost of poor service, such as Whizmos (Where's My Order) calls to your customer service, claims or lost customers from poor service from your carrier.

• Evaluate carriers' peak season capacity to ensure you will be able to serve customers during the most critical time of year. This may seem obvious for retailers, but shippers in other sectors also must have confidence in the service they will receive during the holiday months.

Look at the big picture

• Evaluate your carrier agreement for the total menu of services you will receive, especially those that go beyond basic shipping.

• Does the shipper provide advanced visibility services that can help reduce your bottom line and increase productivity?

• Detailed billing analysis technology is an important factor not only in reducing unnecessary costs but also properly allocating shipping costs across departments and suppliers.

Adhere to the contract

Once the contract is finalized, adhere to it to get your best value. It seems like a simple concept, but shippers often begin splitting volume and dilute their incentives.

Consider this hypothetical but plausible scenario: Production Agency Inc. sends Service Provider Inc. an unencrypted file listing all current Credit Card Corp. customers and account numbers to be used for a promotional mailing.

The file is transmitted electronically for merging with creative content the same day. A terminated employee of Production Agency Inc. remembers the username and password on the Service Provider Inc. server and waits for the file to be uploaded before making a copy. He then uses the information to post thousands of fraudulent transactions on behalf of those Credit Card Corp. customers.

Service Provider Inc. obviously must react to this breach of security, but over-reaction can be costly and ineffective. One customer wants more cameras, another wants bigger firewalls, and both want encryption. Service bureau providers that have thrown technology at security holes can attest to its impact on their bottom lines.

Security basics. Data security is a maturing field of information technology that uses risk management to guide responsible IT operations. Business owners must find and identify confidential data. Social Security numbers, birth dates, credit card numbers and bank account information are protected by law and must be secured at the highest level. Names and addresses are not legally protected, but must be guarded against competitors.

Ultimately, security is the result of rational decision-making. Transmitting unencrypted information via e-mail is tantamount to using postcards instead of sealed envelopes. Because there is no expectation of security, whoever sees the information can read it.

Failure to deploy sufficient firewalls, essential to modern security, can be likened to leaving open your front door. And failure to employ cameras and intrusion detection is like leaving a house without an alarm system. The level of security must be commensurate with the value of the information at risk.

Legal compliance. Besides satisfying customers' security requirements, those who store or transfer sensitive information must comply with laws governing the protection of this information. The table provides relevant privacy laws and standards.

Security challenges. Because service providers, especially smaller ones, face daunting data security challenges, some may cut corners to save money, a huge risk when financial statements and personal information are at stake. Indeed, many may not even be aware of the regulations. Production managers are therefore advised to confirm compliance with internal standards and regulations. When selecting a services provider, they are further advised to require a comprehensive security framework that includes written security policies, reliable infrastructure and continuous security awareness.

Security at the highest levels presents challenges of its own. Creating a security-conscious enterprise requires significant resources and vigilance.

Investing in firewalls, security appliances and software cannot preclude unencrypted data from being sent via e-mail. Even when dealing with aggressive production schedules, service providers must never lose sight of security concerns, but must balance them against customer demands.

Winning the security game. So how can mailers and their service providers win at the security game? Here are some general guidelines:

1. Don't ignore security holes. Think of security as business insurance.

2. Identify at-risk data. General marketing information can be low-risk. Personal financial or medical data are high-risk.

3. Prioritize threats. All security threats have some merit, but not all require equal attention.

4. Act in all parties' best interest. Anyone willing to look the other way to speed the supply chain will not have the same perspective after a security breach.

5. Don't reinvent the wheel. Look to security standards for answers. For financial and credit card mailers, the PCI standard is a comprehensive framework for security.

In the final analysis, a winning security strategy calls for investment in both infrastructure and the education it requires to establish and maintain a pervasive security culture.

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