6 Things Carriers Don’t Want You to Know About Negotiating Freight Rates
Shipping contracts and carrier relationships, like other things, can get stale. This means that it’s natural for the service and rates you are getting from a carrier to occasionally fall out of alignment with your business. When this happens, it’s clearly time to re-negotiate your contract to get your rates and service expectations back in line. While going through the RFP process can be time consuming, it’s an exercise that is always worth the time.
But, don’t go into a contract negotiation or RFP unprepared. Here are 6 things to consider before you get started.
Know Your Products
A key factor in logistics is the type of products you ship. This seems obvious, but as companies’ businesses evolve, their product mix can too. Making sure the Product Classifications are accurately reflected in your LTL tariff, for example, can prevent rates from being overstated. Many companies can secure FAK pricing by discussing their products in detail with carriers — so they know better what to expect. An open discussion with carriers about your products is a great way to see if this is an option for your freight.
Know Your Locations
Locations change just like products do. Where the product is shipping from has a big impact on pricing, so as the location of your suppliers and your facilities change, so will your shipping lanes. Presenting carriers with current shipping data and future plans that may change those dynamics will enable carriers to provide the best pricing for the lanes you ship in.
Know Your Volume
Guess what changes just like products and locations? Your shipping volume. Again, presenting carriers with current data and future projections for shipping volume enables them to model pricing based on where your business is going, not where it was years ago when the original agreement was drafted. The more volume you ship, the better rates you can negotiate, so it pays to be thorough with your company’s volume data.
A flexible shipping schedule is another negotiating tactic. A rigid schedule with outbound shipments or delivery requirements might be met with higher shipping costs from a carrier. Putting constraints on carriers limits their ability to optimize their equipment and people, so flexibility on your part may often lead to lower rates.
The transportation industry is very much driven by supply and demand. Going into negotiations with a lot of contingencies and requirements will lead to higher rates. Likewise, sending the message that you are in need of a carrier NOW shows desperation, and carriers will take advantage. Instead, be relaxed in the negotiations while firmly communicating your needs. Negotiating a contract that is the most beneficial to you will take some time.
Finally, Read the Fine Print
Rules and fees (like accessorials) can vary by carrier, so reading carrier proposals line by line is important. If you’ve been paying for additional charges, like driver unloading for example, an RFP or re-negotiation is a great time to have those types of fees included in your rates or stricken from the agreement altogether.
As a shipper, it is critical that you understand all the points of your agreement. Any agreement should be comprehensive to include clauses for lost, damaged, or stolen merchandise. It should also include any additional fees for shipping hazardous materials, fuel surcharges, or sorting fees. These are all highly negotiable points if you find any of them unreasonable.