Last week, we explored our recent finding that the MESO negotiation process may
have an inherent unintended issue. We have found that when MESOs are accepted, it may not facilitate a current cost examination for CSAs and, when enough contractors in a terminal accept MESOs, it could affect an entire building.
Whether you are approaching a standard end-of-term renegotiation or facing a new contract due to Network 2.0 optimization, the pressure to make the right financial decision is intense. When presented with a Multiple Equivalent Simultaneous Offer (MESO), the path of least resistance is to simply pick one and move on. It feels efficient, and it minimizes conflict.
However, in the logistics business, what feels easiest is rarely what is most profitable.
It is easy to look at the shifting landscape and place blame on external factors or corporate decisions. But successful business owners know that while you cannot control the cards you are dealt, you can control how you play the hand. Instead of focusing on the frustrations of the system, we need to focus on the elements within our control: our data, our expenses, and our negotiation strategy.
The Reality of Network 2.0 Costs
The primary risk of blindly accepting a MESO today lies in the operational complexity of the Network 2.0 integration. The logistics landscape is shifting under our feet, and the "standard" assumptions used to generate these offers may not fully account for the new reality on the ground.
While the promise of Network 2.0 is increased density, the operational reality often tells a different story. We are seeing that the added logistical tactics required for integration are absorbing the time capacity of contractors. Specifically, two major factors are driving up costs:
- Time-Definite Deliveries: Tight delivery windows reduce route flexibility, forcing drivers to bypass closer stops to meet deadlines.
- Same-Day On-Call Pickups: These require drivers to break their rhythm and divert from optimal paths, significantly lowering dispatch productivity.
The driving required to meet these demands is a non-revenue-producing activity. While density may increase, the miles added to handle these specific Network 2.0 tasks often exceed the revenue gains. The result? A higher cost per stop for you—costs that a standard MESO might not cover.
Why You Should Pause Before Accepting
The MESO program is designed for efficiency, but it may be exposing unintended consequences. If the engineering assumptions used to create these offers don't factor in the true drag on productivity caused by time-definite stops and increased mileage, the offer is fundamentally flawed.
If you accept a MESO that doesn't cover your actual cost structure, you are locking your business into a losing formula for the duration of the contract. You are effectively gambling on your business's future—and we should not be gambling with our livelihoods.
A Better Way to Negotiate
There is a path through the negotiation process that yields positive results, but it requires preparation and a willingness to step outside the "easy" automated options.
1. Master Your Expense Structure
You cannot negotiate effectively if you do not know your true bottom line. Before you even look at an offer, you must have an up-to-date, granular understanding of your expenses. This is not the time for estimates.
If you struggle with cost accounting, tools like BudgetIQ can simplify this process. BudgetIQ helps you visualize your real-time financial health and standardizes your budget, ensuring you know exactly what your operational costs are versus what FedEx assumes they are.
2. Don't Go It Alone
Negotiating against a corporation with vast data resources is difficult. Strongly consider utilizing negotiation consultation services like those offered at eTruckBiz. We can perform the deep analysis needed to contrast your specific offer against your actual business cost structure.
We can guide your decision on whether a MESO is sufficient or if a traditional negotiation is necessary.
3. Embrace the Traditional Negotiation
If the MESO doesn't make sense, don't take it. Rejecting the automated offer facilitates a thorough cost analysis. It forces a conversation where you may be asked to submit your cost examination.
This is a healthy exercise. It forces attention on the current, actual costs incurred by the contractor. While it would be ideal for transparency to flow both ways, submitting your data challenges the engineering assumptions made by the settlement team. We have found that an honest look at market costs often results in more favorable charges for the Service Provider.
Drive Your Business Forward
Will pursuing a traditional negotiation instead of a MESO create more friction? Yes. It requires more work, more data, and more communication. However, the reduction in contractor turnover will benefit FedEx by strengthening the brand and the preservation of contractor profit margins will dwarf the mutual inconvenience and cost of the negotiation process.
The goal isn't to be adversarial; it's to be accurate. By leveraging tools like BudgetIQ and seeking expert counsel, you can ensure that your contract reflects the reality of running a business in a Network 2.0 world.
