Four Steps to Negotiating Better Carrier Rates
Knowing that you are getting the best rate from your carrier can be a great benefit to your company and have a very real impact on your bottom line. Shipping contracts and carrier relationships need to be reviewed over time and can often be negotiated to terms that are better for your business.
At the end of the day, we all want to know that we are getting the best rates, quality, and service available from our carriers. But where do you start? Here are four simple steps that you can follow to start negotiating better rates for your business.
1. Gather your data
The more information and data that you can provide to a carrier about your shipping history the better. When you provide only generalizations on your shipping patterns, volumes, or accessorials, the carriers, in turn, will do the same with their pricing. And when carriers give very general pricing, it often results in a very vague agreement regarding the details around service-level discounts. While the gross discounts may look good up front, these agreements usually contain a large gray area of fine print and minimum charges that diminish the final financial benefit to your bottom line.
2. Know your current spend
This second point may seem obvious but going into a negotiation having this information readily available is critical. For example, if you are currently utilizing a single carrier for a sizable percentage of your freight spend you should use this information when negotiating that carrier or its competitors. Most carriers will want to hold on to your business and may be more willing to negotiate if they know that you are shopping competitor rates. Analyzing your current spend can also help you to identify exactly where your money is going. If you are currently spreading out a few lanes across a large number of carriers you may discover that there is more value by scaling back a bit and only using a handful of regular carriers. If the carrier gets the sense that you are invested, and entrusting a majority of your freight with them, they are more likely to negotiate better rates.
3. Be Flexible
Having a flexible shipping schedule is another good tactic for negotiating better shipping rates. A “set in stone” schedule for your outbound shipments or strict delivery requirements might be met with higher shipping costs from most carriers. Putting these types of limitations on a carrier often times also limits their ability to efficiently utilize their equipment and personnel, so having flexibility on your end of the negotiation many times results in lower rates.
4. Let the carriers compete for your business
It’s well known that there are many excellent shipping companies to choose from a service standpoint, but it would be a mistake for you to assume that you cannot use multiple carriers for all types of service levels. Even though your company may have no intention of allocating some or all its volume to another carrier, it’s important not to share that information up-front during a negotiation. Each carrier’s value proposition is unique and usually based on years of quality and reliable service. While each carrier has strengths and weaknesses in various areas, the big picture is that you have many options to choose from if you are looking to lower your shipping rate costs. It would be unwise to show all of your cards up front and negate the amount of leverage that you have to reduce your shipping rates.