How to Successfully Negotiate an ISP
Sign an Operating Agreement and a Limited Release
Once you sign the agreement, you enter the ISP transition timeline. You will have about 5 months after signing to get your business up to scale.
Organize Your Territory
FedEx1 is moving toward overlap and condensing service areas. In short, this means combining Ground and Home Delivery routes. Many contractors are merging with others in their areas to achieve this overlap. If, for instance you’re a Ground contractor, you’ll want to look for Home Delivery routes in your area to combine with. Contractors who are already at scale will still need to consolidate within their areas. Under ISP contracts, all operating schedules will be 6 days a week.
Update Your Fleet
Because ISP standards for vehicle fleets may be higher than those under prior contracts, you’ll want to begin any necessary upgrades immediately. It’s possible that your regional safety person will not be able to perform your inspection early in the process. As such, you shouldn’t wait to be told that you need to upgrade your vehicles. Remember: If you’ve purchased a route and/or vehicles from another contractor, each truck will need to have the correct corporate ownership and correct corporate name on the trucks.
Perform Background Checks
Even if it has been done before, all authorized officers, business supervisors, and drivers will need new background checks.
Finalize Your Contracted Service Area
Contracted Service Areas (CSAs) should be specifically defined. You’ll need to meet with your terminal management in order to map out your CSA. Be sure to be very precise in this mapping; specify boundaries by the street name and side street (as applicable). Be sure supplemental routes are clearly defined. CSAs will be checked along with other CSAs in the terminal to make sure all boundaries are correct before they are approved by FedEx.
Examine Your CSAs Historical Data
Before beginning negotiations, FedEx will provide you with your CSAs delivery data for the past year. Review this data carefully to determine if adjustments need to be made. This data will impact your negotiations so be sure they are accurate.
Negotiations can take upwards of 5 weeks and will consist of exchanging multiple proposals with your assigned FedEx negotiator. You should take full advantage of the time you are granted for negotiations in order to make the terms as favorable as possible. The key numbers that will influence your negotiations are: packages, stops, and fuel. Your Annual Service Charge is a fixed cost that is calculated based on core zones, van availability, and quarterly bonuses. There are also safety and service bonuses (formerly the CCS Bonus). In order to make more money under the ISP contract than you did under the IC, you’ll need to know your historical data, territory, and expenses.
Variable vs. Fixed Rates
One of the key components of your negotiation will be determining what percentage of your business is variable and what is fixed. A higher variable rate means that, as your business grows, so does your income.
After negotiations are complete, FedEx will draft your contract within about 3 weeks.