Your business has grown and your needs have changed. Have your shipping contracts evolved in tandem? Chances are, they haven’t. The rates and terms you negotiated in the past may not apply to your business’s current needs. Now is a prime time to readdress and reconsider them. Focusing on rate negotiations will help your business establish better shipping partnerships with more favorable terms, so you can continue growing.
The first quarter is a prime time to discuss rates with carriers. Major carriers like UPS, FedEx, and USPS deploy General Rate Increases (GRIs) at the end of the fiscal year (December) or at the very beginning (January), meaning it’s prudent to examine your budgeting models during this time. In doing so, you can also address your rates with smaller carriers, including any local or regional intermodal carriers you work with on a regular basis.
Prepare to negotiate
Reassessing your rates and negotiating lower ones takes strategy. You can’t simply go to the table and say “I want a lower rate.” Everyone wants a lower rate! To be effective in securing lower rates, you need to justify them.
- Provide detailed presentations of your shipping volume and frequency with each specific carrier. This shows your importance as their customer and puts your business into real dollars and cents.
- Outline your surcharges and special fees and explain them in context of your business. These are great places to negotiate if you can demonstrate how reducing them will improve your relationship with a carrier.
- Show your business’s growth outside of shipping. Providing this context to partners gives them incentive to appease you. No carrier wants to lose a customer rapidly expanding, knowing their shipping volume is likely to mirror that growth.
Negotiation is the key concept here. Shippers want consistent business at scale; businesses want low rates. Find something that works for both. You need to provide indisputable evidence to support your demand for lower or more favorable rates. Numbers speak volumes; dollar figures are king.
Position yourself to benefit carriers
Although numbers and figures are important, there are intangibles you also can leverage in rate negotiations. For example, carriers value steady and consistent runs, load management, operational excellence, and more. These characteristics make your business more valuable than erratic partners.
There’s also the option to consolidate your freight demands. A shipping carrier that’s valuable to you may warrant more of your business, which can parlay into lower shipping rates. This best-of-both-worlds scenario is ideal for both parties and usually sets the tone for a stronger ongoing relationship.
Don’t negotiate to a detriment
Rate negotiations should never come down to an ultimatum. “Lower my rate or I leave” is not a productive approach to garnering lower rates. Even if they do reduce rates, there likely will be tension in your partnership in the future. Be mindful of the give-and-take balance in negotiations and work to find a compromise that benefits your business and the shipping carriers you rely on.