DHL Contract Negotiations: Tips & Tricks

Are you a shipper with a large volume of imports or exports?  Or do you have frequent lightweight domestic shipments to residences?  If so, then you should consider DHL for your shipping needs. In this article, we will discuss DHL as a carrier and provide tips when it comes to parcel contract negotiations with DHL.

You’re already aware of how vital shipping and transportation are for the long-term success of your business and what a drain it can be on your operational budget, particularly in the case of a poorly negotiated contract. The shipping contract you negotiate with DHL can significantly impact your bottom line.

It is essential that you prepare thoroughly and sit down with your DHL sales rep to negotiate better rates and contract terms. When shippers go into their parcel contract negotiation unprepared, they leave feeling like they ended up on the losing side of the deal.

While this may seem like an intimidating and one-sided negotiation process, rest assured that it is not. So, if you are negotiating with DHL for the first time, or re-negotiating, remember that your spending is significant to them, you have leverage and can use it to sweeten your deal. Contract negotiations do not happen overnight; they can take weeks, even months of lengthy discussion filled with concessions and give and takes.

About DHL

If you regularly ship internationally, DHL is the most extensive international logistics carrier in the world with a network that reaches throughout all of Europe and into Asia and Africa. Because of this global shipping experience, DHL global forwarding is well-prepared to help you overcome customs red tape and international logistics.

Also, if you have large quantities of e-commerce orders that are light, then SmartMail, DHL’s partnership with the US Postal Service, can be a cost-effective shipping option.

Know Your Shipping Profile

To optimize your contract with DHL, you need to know your shipping profile. This requires a review of shipping data, understanding your volume, where you ship, and weights. It can also be beneficial to know what surcharges occur most frequently.

So, you should be able to answer with exact numbers any of the following questions at your carrier contract negotiations with DHL. If you can be flexible, quite often you can find leverage points within these questions to use as trading pieces for better rates or terms.

• How many shipments do you have?
• How many locations do you have?
• What is your regular freight?
• What type of DHL shipping services do you want?
• Where do you intend to regularly ship?
• How frequently do you intend to ship?
• What days do you ship? Are you flexible or on a rigid shipping schedule?
• Are you a seasonal shipper?
• When are your peak business/shipment months?
• Do you expect your business and shipping needs to expand, shrink or remain relatively the same?

Before you meet with your DHL carrier, you should be aware of the surcharges DHL levies for exceptional activities. Many of these can be waived or reduced as part of negotiations. Also, make sure you are aware of the surcharges DHL levies for exceptional activities. Such surcharges can be removed or changed to the flat rate if negotiated properly.

DHL Surcharges – Import/Export

• Remote Area Pick Up or Delivery: These areas include islands, highlands, or zip codes that are difficult to serve, or towns/suburbs that are distant, or infrequently served.

• Dangerous Goods: DHL complies with IATA and ADR regulations and is certified to carry certain types of hazardous goods, although not between each and every origin and destination. A surcharge is applied per shipment when the handling and transportation of shipments involve substances and or commodities that are classified as dangerous goods. They must be restricted to one shipment that cannot weigh more than 67lbs.

• Dry Ice: A surcharge is applied per shipment for handling and transportation where Dry Ice is used as a freezing agent. Such goods must be approved beforehand.

• Lithium Batteries: A surcharge is applied per shipment when the handling and transportation of shipments contain Lithium Ion or Lithium Metal batteries compliant with the appropriate IATA Packing Instructions 966, 967, 969, and 970, Section II. If they do not have those things, or if the batteries are suspected of being damaged or defective, then DHL will not ship such items.

• Non-Standard Shipments: A fixed surcharge is added to any piece or pallet heavier than 70kg or larger in dimensions than 120cm. Any shipment pallets, pieces, skids that weigh more than 1000kg, or that are larger than 300cm in dimensions will not be allowed.  If pallets within a shipment cannot be stacked, either due to shipper requests, or the shape of the item, a surcharge will also be applied.

• Address Correction: A fixed surcharge is added to any shipment with the wrong delivery address at the time of pick up.

• Fuel Surcharge: Due to the inherent volatility of fuel costs, DHL applies a variable percentage meant to offset that cost. This surcharge applies to all transportation services.

• Elevated Risk: If you are shipping internationally to a country in the midst of a state of war, civil unrest, or regular terrorism threats, an elevated risk surcharge will be added. Such countries include Yemen, Syria, Afghanistan, Iraq, Libya, Niger, South Sudan, and Mali.

• Restricted Destination: If you wish to ship to countries subject to UN Security Council trade restrictions, you will be hit with a surcharge. Countries include; Democratic Republic of Congo, Yemen, Syria, Central African Republic, Iran, Iraq, Libya, Somalia, Sudan, and North Korea.

• Exporter Validation: If you desire to ship to countries that are subject to trade restrictions imposed by federal regulatory agencies then you will be given a surcharge. These places include Zimbabwe, Afghanistan, Cuba, Belarus, Lebanon, South Sudan, and Myanmar.

DHL also offers customs services to support the clearance process.

DHL Surcharges – SmartMail

• Fuel Surcharge – Due to the inherent volatility of fuel costs, DHL applies a variable percentage meant to offset that cost. This surcharge applies to all transportation services.
• Signature Confirmation – This is available for a fee if needed.
• Delivery Area Surcharges – This is one major difference between SmartMail and the competing offerings from FedEx (SmartPost) and UPS (SurePost).  FedEx and UPS charge anywhere from $1.35 – $1.90 for deliveries to certain zip codes that are outside of their typical delivery area.  DHL does not charge a similar fee. Other fees can be applied based on the dimensions of the package.

Contract Negotiation with DHL

By knowing your shipping profile thoroughly, you can see room for contract negotiation, improvement, or change in your shipping services. Armed with this information, DHL will have a much clearer understanding of what your logistical needs are and how much that might cost you in the long run. As you might imagine, thorough knowledge of your shipping data is one of the most vital tools you can bring with you to the negotiation table.

Remember that there are minimum charges that apply to any shipment. Those minimums can be negotiated as well.  If you negotiate parcel contract for high discounts but neglect the minimum charges, you will not realize as much savings as you could have.

Therefore, it is critical that you know and understand your shipping data to forecast what the new agreement will actually save you. Like any contract negotiation in supply chain management, you want as much information as possible about your shipping profile and how DHL operates so that you enter the room on an even footing.

When it comes time to work out these details, it is important to remember that your attitude and actions in the meeting can have long-term effects on your business relationship. Entering the room aggressively and treating this time as a battle rather than a discussion will not be beneficial to either party. Negotiations require concessions to be made by either side.

If you’re curious to learn more about contract negotiations with other carriers, read our linked resources on how to negotiate shipping rates with FedEx and tips on UPS contract negotiation. 

Audit your invoices for cost savings and for targets for renegotiations

Parcel carriers increase their rates annually.  Typically, the announced increase is not what your increase will be. Analyzing your data to determine your true increase will lead to discussion points with the contract carrier and an opportunity for them to make some adjustments where appropriate.

A full renegotiation can occur every 2 or 3 years.  This way you illustrate your loyalty to DHL and commitment to your long-term deal, while also giving you the opportunity to react to your business or market circumstances. 

The invoices DHL sends you are filled with data you can use to study and re-examine your methods. By paying careful attention to your invoices, you can find a place to improve efficiency, cut shipping costs, and respond to trends.

Although these invoices can often be quite dense, by auditing your invoices, you hold DHL accountable. Errors are not uncommon in this industry, so look for these:

• Did DHL apply zone charges correctly?
• Did DHL apply relevant taxes correctly?
• Did DHL add inapplicable surcharges?
• Did DHL charge you multiple times for the same shipment?
• Did DHL make a calculation error that leads to overcharges?
• Were your agreed-upon discounts adequately applied?

By auditing your invoices, you can make sure you are not spending a cent more on shipping than you should be. Further, it gives you ammunition for future discussion or target areas for concessions or fee waivers. On top of all that, it shows DHL that you are very serious about the success of your business and that they ought to treat it with the same respect.

If you are looking to negotiate or optimize your parcel contract with DHL, do your homework. Be prepared and come openly and honestly to the table, willing to be flexible in your discussions. You can also pull up pricing from different parcel carriers for comparison and to help you negotiate the best contract prices. 

Remember that your DHL rep can and will help you, especially if you treat them well and develop real relationships. Have periodic business reviews and keep them advised of any changes to your shipping patterns.  

Doing so will incentivize them to give you deals, discounts, or advice on ways your company can save money on its shipments.

If you still have questions around the best parcel optimization and negotiation tactics, it’s helpful to utilize a shipping consultant to ensure you are getting the best deals. Be prepared and come openly and honestly to the table, willing to be flexible in your discussions.