While spot quotes can sometimes result in a great rate in a pinch, they’re not an effective long-term strategy. In this world of ever-increasing transportation costs, smart shippers seek mutually beneficial partnerships with their preferred carriers, establishing contracts that guarantee a fixed rate.
This strategy can dramatically reduce shipping costs and ensure reliable ongoing service. But the presence of a contract can also lull companies into a state of complacency.
Without regularly auditing their freight costs to ensure they’re still getting the best rate, companies can quickly wind up paying more than they need to. Just because a rate was competitive at the time the contract was signed doesn’t mean that will still be the case when the renewal period rolls around.
Here’s how companies can ensure they’re not overpaying before renewing a contract—without damaging their relationship with the carrier.
Gain visibility through benchmarking and competitor analysis
Negotiating the best deal starts with figuring out how much the company stands to gain from renewing its contract. That requires internally benchmarking shipping costs and comparing it to industry-wide trends.
Without taking this step, it’s impossible to know where the bar is set—making it difficult to spot opportunities to save.
In the months leading up to a contract renewal, it’s also a good idea to request rates from other carriers. It never hurts to weight up the options and gather as much data as possible before making a final decision.
That said, price is not the only consideration here. Jumping on a lowest-price bid can sometimes result in greater costs down the line—like if the carrier fails to deliver on its promise, resulting in expedited shipping costs to fix a mistake. Weighing up metrics like reputation and reliability can make all the difference in the long run.
It’s also important to remember that a company’s circumstances can change dramatically throughout a contracted period. The volume of overall freight shipped may have increased or decreased. Or perhaps the company has started shipping more specialized freight, which the initial contract didn’t account for. Simply renewing a contract without checking whether the terms are still favorable can lead to massive missed opportunities—and higher costs.
Return to the negotiation table
Best-in-class companies don’t renew a contract just because it’s convenient. They return to the negotiation table armed with data to make their case.
The best carrier-shipper relationships are symbiotic. As a shipper, that means coming to the table with data that proves how much value the company can bring to the carrier.
Carriers are looking for consistent, desirable freight from a shipper they like to work with. That means that companies can leverage their advantage by bringing data around the volume of freight they shipped the previous year (both with the specific carrier and overall, if they’re looking to adjust the contract terms), as well as the forecast for the coming year.
A good relationship is harder to prove—but if it exists, it should already be felt by both parties. There’s still some data a shipper can provide, however, to make their case, including showing that they always paid the carrier on time.
While carriers are often incentivized to offer lower rates to shippers they’ve worked with before and know to be reliable, like any business, their goal is still to make money. They will rarely offer a lower rate without the shipper instigating the discussion. The old adage that those who don’t ask don’t get applies here. It’s vital that shippers work together with their carriers to secure mutually beneficial deals.
Of course, sometimes a carrier just can’t or won’t lower its rates. In these cases, if the shipper can get a better deal elsewhere, then ending the professional relationship amicably is often the best move.
Where visibility meets strategic partnerships
Gathering the right data to benchmark rates and negotiate effectively requires the right tools. CTSI-Global’s industry-leading transportation management system and freight audit and payment solutions make it easy for companies to see what they’re spending and where. And with robust business intelligence capabilities, shippers are empowered with vital insights into carrier performance and more.
But we want to be more than a solutions provider to the companies that work with us. We aim to be a strategic partner. That’s why we also work with a vast network of trusted carriers to help shippers secure rates they won’t find elsewhere.
Ship smarter. Partner with us today.