Companies can't set their shipping budgets based entirely on what they did last year — that's a "recipe for disaster," says Brad McBride, chief executive officer with Zero Down.

Parcel rates set according to the previous year are bound to be “totally off-base, and not even close to what the real budget should be,” says McBride. That’s because parcel carriers no longer restrict themselves to just one annual general rate increase, as was the case for many years, when UPS and FedEx often were the only options for shippers. Now, there might be seven or eight increases per year. “If customers don’t change the way they manage their parcels, their budgets are going to spiral out of control,” he says.

Revenue leakage can occur at multiple points. Sometimes the rates weren’t good to begin with, McBride says. Other times, shippers might wait two or three years before renegotiating with carriers. “They need to be doing that on an annual basis, to make sure they’re paying market-competitive rates.”

The big parcel carriers still exercise a lot of market power, but shippers can mitigate their dominance by knowing their own data “better than ever before,” McBride says, adding that a qualified third party with expertise in market conditions can help with negotiations.

Despite the power of the big carriers, there’s room for bargaining. UPS and FedEx often will make adjustments for shippers in order to prevent competitors from gaining a foothold in the marketplace.

A healthy parcel logistics strategy starts with careful carrier selection based on the best available rates, McBride says. Equally important is having a good carrier mix, as well as knowing customers’ precise business requirements, and the ability of each chosen parcel carrier to meet them.