Navigating contract renegotiation requests with FedEx can often feel like a daunting
task for contractors, especially as the Express integration continues to evolve. Between the introduction of Network 2.0 and FedEx’s new partnership with Amazon, contracted service providers (CSPs) are encountering increased operational challenges and complexities. Adjusting to these changes requires not only operational agility but also the ability to advocate for contract terms that align with updated cost structures and business needs.
Unfortunately, contract renegotiation requests don’t always succeed, and understanding the reasons they might be denied is critical to ensuring future success. Below we will explore the top reasons FedEx denies renegotiation requests, provide actionable steps to overcome these hurdles, and equip CSPs with the tools needed to successfully request a contract renegotiation.
Why Contract Renegotiation Is Crucial
The FedEx landscape is shifting rapidly, particularly with the seemingly never ending operational changes that are being implemented. These changes have altered delivery expectations, increased operational costs, and reshaped service area characteristics for many contractors.
Contract renegotiation is essential for CSPs to adapt their settlement charges to the new challenges and protect their bottom line. Whether it’s increasing fuel costs, higher labor expenses, or the need for additional operational resources, aligning your contract with these realities ensures that your business remains sustainable and profitable.
However, contract renegotiations often face scrutiny, and FedEx Settlement Engineers require clear, data-backed reasons to approve changes. By identifying the most common reasons for denial and addressing them proactively, CSPs can strengthen their cases and secure the terms they need.
Common Reasons for Denied Contract Renegotiation Requests
Lack of Resource Utilization
FedEx assesses your use of resources like on-road hours and vehicle capacity when considering renegotiation requests. If resources are perceived as underutilized, it’s challenging to justify changes to your contract.
Solution:
- Maximize vehicle efficiency by planning productive routes with the FRO that reduce downtime and maximize all types of capacity.
- Use eTruckBiz programs and tools that help you get visibility into your operation so you can find wasted capacity and correct the situation.
Low Average On-Road Time
FedEx expects an average of approximately 8+ hours on-road per daily dispatch. Falling short of this benchmark can raise concerns about route efficiency, leading to a denied request.
Solution:
- Track average on-road hours with software tools and adjust dispatch schedules to meet the required metrics.
- Consolidate stops / eliminate "extra dispatches" where possible to improve the average on-road time.
Insufficient Expense Knowledge
A renegotiation request without a strong understanding of your cost structure suggests poor preparation. Without detailed expense tracking, it’s almost impossible to make a compelling case.
Solution:
- Track and document all operational costs meticulously.
- Use tools like the eTruckBiz BudgetIQ program to organize and monitor financial data effectively.
No Financial Data Provided
Failing to respond to FedEx's requests for financial data weakens your case. FedEx uses this information to validate your claims, so not providing it can signal a lack of transparency or preparation.
Solution:
- Respond promptly to all data requests with accurate and up-to-date information.
- Leverage financial management programs, like eTruckBiz's BudgetIQ program, to stay prepared.
Minimal Changes in Work Area Characteristics
FedEx may deny your renegotiation request if your service area has not undergone substantial characteristic changes.
Solution:
- Highlight significant shifts, such as new delivery area or zip codes, changing package characteristics (size), or increases.
- Be prepared to produce data back your claims
Increased Stops
Typically, a <10% actual vs. projected number of stops per week threshold is another common reason for denials. This metric is critical to FedEx’s evaluation process.
Solution:
- Regularly monitor and document your CSA's performance vs. projected number of stops.
Lack of Observational Ride Data
Contractors should use observational ride data to evaluate route efficiency and assumptions. Without this data, it’s challenging to dispute their engineering assumptions.
Solution:
- Conduct observational rides and document findings to support your case.
- Provide evidence (data) that identifies discrepancies in FedEx’s assumptions.
Take Control of Your FedEx Contract Renegotiation
Contract renegotiation is a critical step for FedEx contractors to adapt to industry changes, protect profitability, and maintain sustainability. By addressing common reasons for denial, tracking key metrics, and engaging with tools like the eTruckBiz BudgetIQ program and business software, you can strengthen your case and increase your chances of success.
Don’t leave your business success to chance. Sign up for eTruckBiz’s BudgetIQ program today and take control of your FedEx contract renegotiation!