Overcoming Freight Rate Negotiation Misconceptions
Whether you love it, or dread the thought of it, everyone understands the importance of negotiating good carrier freight rate contracts. But for many reasons, a lot of companies hesitate to take control of the negotiation process and really do what it takes to get the rates they deserve.
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Overcoming the misconceptions about freight rate negotiation that are costing you money
written by Jillian Farrington
Whether you love it, or dread the thought of it, everyone understands the importance of negotiating good carrier rate contracts. But for many reasons, a lot of companies hesitate to take control of the negotiation process and really do what it takes to get the rates they deserve. Sometimes this hesitation is routed in misunderstanding your rights as a customer.
Shippers who take ownership of their carrier rates negotiate better contracts—it’s that simple. Sometimes that requires not taking all of the things you hear from carriers at face value. Here are three reasons shippers stick with contracts they know are not the best they can get.
1: My agreement hasn’t expired
Contracts are important this is obvious, since they set the rates that determine your shipping costs for a long time. But for how long? It would surprise many companies to know that carrier contracts can be renegotiated before they expire.
Markets and costs change fast in the logistics industry, this means your ‘great’ rates can quickly become above market. This is the reason it’s important to understand that carrier contracts are not permanent. Optimizing your shipping costs means keeping your rates and contracts current and where the market is today.
The truth is you can negotiate any time, and most companies do after 13 months.
2: I can’t use a third party
Carriers are experts at negotiating because they must be. There margins and profits depend on winning business at the highest possible rates. You can be sure that behind your smiling sales rep there is a team of pricing analysts who understand your shipping spend far better than you. The good news is you can use a third party, and if a carrier tells you otherwise they are strong arming you.
Either way companies, like Transportation Impact, operate behind the scenes. The carriers never know you have an expert on your side. Having a partner evens the playing field so you’re at an equal information advantage with the carriers.
3: I can’t share my shipping data
This is another strong arm tactic used by the carriers. Your shipping data is yours. Why would it be anyone else’s? Carriers know data is a powerful tool that enables you to negotiate better, but they count on the fact that individual companies don’t have the tools to make use of it. Getting shippers to question who’s data it really is confuses things even more.
Preparation is the key to negotiating carrier contracts, and this starts with gathering data about your own business. If you need it, don’t be shy about insisting that carriers provide complete reporting on your shipping patterns and volumes. When it comes to rates you will never get more than what you ask for from carriers.
Making assumptions or believing what carriers tell you doesn’t help either. Seeing past these misconceptions is a direct way to control of the negotiation process and get the shipping rates you deserve.
Thank you for listening. For a free, no obligation, analysis of your logistics spend visit TransportationImpact.com. Have a great day!