Types of Freight Contracts and How to Manage Them More Effectively
Freight contracts are a cornerstone for your entire procurement process. The rates and terms outlined within them dictate everything from the price you pay to move product to the effect it has on your bottom line. The more contracts you have, the harder they are to manage. It’s ideal to have a system in place that not only manages your many freight contracts but also helps you understand, negotiate, and capitalize on them.
Types of freight contracts
The purpose of most freight contracts is to discern rates and responsibilities between freight brokers and carriers, as well as liability. That said, depending on the type of agreement and the nature of the business, brokers may find themselves juggling an assortment of contract types:
Broker carrier agreements are signed after a freight rate is agreed upon. They include a variety of data such as agreement date(s), pay dates, invoicing procedure, and liability or insurance information.
Load tenders are detailed agreements about the consignee that will receive freight. Tenders include descriptions of the freight, weights and measurements, and pertinent contact information.
Rate confirmations are a form of contract that legally binds all parties to the agreed-upon brokerage rate for freight. These can be ongoing and are often filed and applied to ongoing freight transactions.
Accessorial contracts outline any handling charges, detention and wait time fees, refueling costs, or other unexpected charges that come with moving freight. These contracts acknowledge accessorial costs and set protocols for them.
Bill of Lading (BOL) is less a contract and more a receipt, signifying delivery of freight. A BOL is a legally binding document once signed and filed.
These documents are of crucial importance to both freight brokers and carriers. Brokers especially need a way to categorize, confirm, and recall these documents, for purposes of accuracy during account reconciliation and/or brokering new runs.
Centralized managing for freight contracts
The problem with managing freight contracts isn’t just how many of them there are across all carriers and vendor partners. It also extends to things like amendments, situation-based rate changes, freight-specific terms, and much more. Simply put: Freight contracts are subject to change, and updating them accordingly is paramount.
The first and most important step for better contract management is centralization. Centralization not only creates a manageable filing system for contracts but also enables quick reference and comparison between contracts, for optimal booking and better decision-making.
Centralization also enables better auditing and reconciliation for various carrier accounts. For example, searching a centralized contract database against amounts on a BOL can quickly yield insight into major discrepancies or help brokers determine out-of-tolerance variables.
Better management of freight contracts — such as comparing BOLs, load tenders, and accessorial contracts against well-kept records about your relationship with a specific vendor — will help you negotiate them more effectively in the future. Discerning trends, errors, and critical variables gives you leverage when re-working contacts or helps inform negotiations on new contracts.
You may decide to drop carriers that have consistent issues across their invoicing in favor of better rates with more accurate carriers. Likewise, you may drop small carriers in an effort to consolidate business into larger vendors. Having this data readily available via a centralized contract management system unlocks a world of possibilities regarding contract negotiations.
Armed with the right data in an accessible mode, freight brokers will be able to make insights that benefit their bottom line.
Looking for a way to better manage freight contracts and reap the benefits of better terms? nVision Global can help! We offer experienced contract management services, leveraging our robust digital platform to ensure that your contracts are effortlessly managed. Visit our website at nvisionglobal.com.