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3 reasons your freight and small parcel spend is higher than it should be
written by Keith Byrd
It can be hard to finish your negotiations for freight or small parcel spending and not feel like you have left some money on the table. Carriers do their best to keep shippers off balance with details and extra things that make it almost impossible to know if you are ever really able to get the best possible rates from them.
However, this is not an excuse for you not to try, your confusion isn’t the carrier’s fault and they are not in the business of giving away the best rates without some resistance. Like any successful company, yours included, they live and die by their margins. Here are three reasons you could be spending more than you should be on freight and what to do about it.
1: You don’t understand your own business well enough
Carriers cannot provide the best price if you can’t clearly articulate your needs. If you are not tracking and measuring shipment volumes by lane, it’s impossible to paint a clear picture of your business for carriers. Details like your specific product types and handling requirements go into pricing as well. It’s these details that shape the pricing that carriers will offer you, and the more specific the better.
It’s also important to communicate how your business may be changing in the future. Shipping patterns and locations change pricing, sometimes for the better and sometimes for the worse. Again, what matters is that it starts with a clear understanding of your own business.
2: You didn’t properly prepare for contract negotiations
Leading into a contract negotiation requires a lot of planning. Not being organized with your data makes it impossible for you to do a true apples to apples comparison between different rate proposals. This is very important for you to control, because it’s common tactic for carriers to make comparing their rates and those of their competitors difficult. They do this by providing different rate matrices and accessorial surcharge tables.
Navigating through these can be messy. It’s a mistake to not have a partner.
3: You are not optimizing your routing
Higher costs don’t just happen because of bad rate negotiations. They are also the results of poor choices. When mode and carrier choices are made based on bad assumptions, costs go up. For example, there can be a fine line between what’s the better choice for many shipments when choosing between shipping something small parcel vs. LTL. Many times, this decision is made on general assumptions, like all shipments over 200 lbs go LTL. The structure pricing carriers in your own contracts, may change the math behind this kind of decision with each new contract that you sign. Similarly, many shippers are paying for service levels they do not need, like 2-day express when ground will get it there just as soon.
As a logistics professional, optimizing your company’s shipping spend is a big part of what you do. It’s probably something you take a lot of pride in. Focus on these three areas, is a fast way to take control of your contract rate negotiations with your carriers and optimize your logistics spend.
Thank you for listening. For a free, no obligation, analysis of your logistics spend visit TransportationImpact.com. Have a great day!
