Do you ever really know that you’re not spending too much when you negotiate a freight or small parcel agreement? When you come out of a rate negotiation, there’s often that niggling feeling that you have left some money on the table. Carriers do a good job of keeping shippers off balance with details and extras that make it near impossible to know if you’ve negotiated the best possible agreement.
However, knowledge is power, and the better armed you are with knowledge when you go into a negotiation, the better will be the agreement you walk out with. Like any smart business person, carriers take advantage of shippers’ confusion, so here are two ways you can close the information gap for your next rate negotiation, plus a strategy for using your rate agreement to keep your freight or small parcel costs down.
1 – Understand your own business
In order to provide you with rates that work well for you, carriers need to know what your needs are. Painting a clear picture of your business and your shipping landscape will help carriers to help you. Data that you should be providing to carriers includes:
- your specific product types and handling requirements
- measures of shipment volumes by lane
- locations of distribution centers
- shipping patterns by location and season
- any other variables that affect pricing, especially factors that incur surcharges
Going into a rate agreement negotiation with granular data and a thorough understanding of your own business will equip you to obtain an agreement that is closely tailored to your needs.
2 – Get help if you need it
Leading on from point 1, entering into contract negotiations requires a lot of planning. To do a true apples-to-apples comparison between different rate proposals, you need to be very organized with your data. It’s a common tactic for carriers to make it very difficult to compare their rates with those of their competitors. Rate matrices and accessorial/surcharge tables that use different formats and different variables are just two pieces of this complex puzzle.
A partner can help you put the pieces of the puzzle together to form an accurate picture that you can use to make the best decision.
3 – Optimize your routing
The choices you make once you have your rate agreement have a large effect on your freight or small parcel spend. Mode and carrier choices made based on bad assumptions lead to higher costs.
For example, the choice between shipping something small parcel vs. LTL is often made on general assumptions like “all shipments over 200 lbs. go LTL.” But the other variables of the shipment and your own rate agreements can change the math behind this type of decision. Similarly, many shippers pay for service levels they do not need, like 2-Day Express when Ground will get it there just as soon.
A TMS can automate these types of decisions and ensure that the best choice is made every time.
As a logistics professional, optimizing your company’s shipping spend is a big part of what you do. Focusing on these three areas is a fast way to make sure you can be proud that you’ve done your job well.