Dos and Don’ts While Negotiating Freight Rates
The simplest way to drive double-digit cost savings every time you ship is to ensure that you negotiate well to get the best deals each time. Being in total control of how much you pay for your shipments and making use of the right tools to negotiate better is crucial to improving your bottom line.
The easiest way to ensure that you’re procuring the best possible rates for your shipments is to automate negotiations, benchmark prices and make data-driven decisions. All this and more is possible with the latest technological advancements.
GoComet’s cloud-based Freight Quotation Management module fully automates your negotiation process and helps you drive significant cost savings with its reverse auction methodology and unique compounded negotiation system. It enables you to reduce freight procurement costs by up to 18%.
But that being said, there are a few things to keep in mind when aiming to negotiate better freight rates. Consolidating your RFQ to send out to all the interested vendors is not something that you can whip up out of the blue. Be it an RFQ, direct negotiation or even an indirect negotiation, there is a lot of knowledge that you can be aware of when trying to properly negotiate. For instance knowing specifics of certain freight costs, how the rates vary in and out of peak season, if there are loading or unloading pallets involved in the load, and much more.
If you are not very confident about these areas you can consider the option of bringing in a broker to negotiate for you. Don’t be afraid to reject a base rate and be willing to do some contract negotiation before you agree to the final bid. Here are some dos and don’ts that you can keep in mind tocan negotiate better rates and secure the best possible deals:
5 tips to help you negotiate like a pro and secure the best deals for your business
- Know your freight spend
Carriers will pose questions like, “How much tonnage do you plan to ship?”, “Is your delivery timetable flexible?”, “How much do you pay your current carrier?”, “How much do you want to pay?”, “Do you know what your freight classification is?” Don’t rely on your memory to answer these questions.
Instead, gather this information beforehand and keep it at your fingertips during an active negotiation. It can be beneficial to assess where exactly your money is going. Accepting rates below your operating cost can hurt your operation and may even put you out of business. Keeping all this mind when looking at freight quotes will present you with opportunities to drive cost savings, wherever possible.
- Don’t underestimate the value of a trusted carrier
You may not always get the price that you negotiated. If you’re satisfied with a carrier’s reliability and flexibility, don’t lose sight of the value your carrier brings. Try not to be single-minded and understand where the carrier is coming from. The rate of supply and demand between shippers is always fluctuating, and a reliable carrier can shield you from any price hikes or delays in the future.
Working directly with your carrier representative is a good place to start in understanding the needs of your carrier and what it means to be a good customer. Be flexible in your negotiations and be prepared to compromise to ensure both sides are getting a fair deal.
- Know your competition
One important aspect of your negotiation process is identifying your direct competitors and analysing their freight spend. You need to know what are their shipping volumes, what are their main routes, what are their weaker routes and so on.
How does this help you? Your peers could be shipping with the same carrier that you are negotiating with and it will be useful for you to be aware of the rates they’re paying for a similar shipment.
- Look out for hidden costs that can be eliminated
Identifying charges or hidden costs that can be eliminated like, “What’s the extra time allowed for pickup and delivery?”, “Are you charged for deliveries on days other than the business days like holidays and weekends?”, “Do they charge extra for cash on delivery?” and so on can significantly cut down on expenses.
Keep a sharp lookout for accessorial charges and incorrect invoices to avoid paying for things that you have not agreed to pay for. Ask about fees, freight charges, surcharges and make sure they are covered in the final quote.
- Get everything in writing
Don’t leave anything to chance. Make sure to get the complete signed carrier agreements and rate confirmations before closing the deal. Verify the length of the agreement, compensation for lost/stolen/damaged goods, fuel costs, sorting fees, and the shipping of hazardous goods.
Negotiate the best deals for your freight
A lot of studies show that to secure the lowest price, you need to have at least eight or more active bids at your disposal. Unless you want to manually initiate all eight-plus interactions, reach out to us today to see how we can automate all of this for you.
GoComet’s RFQ management system gives you the power to increase productivity, work more effectively with your customers and carriers, and reduce your freight procurement costs to gain a competitive advantage over your peers. Engage with multiple trusted vendors and get the best deals at the best price, every time!