While most of my posts are focused on international logistics and regulations, I sometimes assist clients with domestic transportation issues. I have been on both sides of the table in the LTL industry so allow me to offer some thoughts.
Many shippers are making quick carrier changes at the moment due to the possible demise of YRC. Capacity will tighten and the remaining carriers will be selective in taking on, and pricing, new business. However, the industry will always be competitive and the pricing pendulum swings back and forth.
A common mistake made by small and medium sized clients is failing to prepare before meeting with carrier representatives. Another mistake is focusing on price. A better strategy is to emphasize value and show the desirability of your freight. If you determine that prospective carriers have the capabilities to provide quality services you will be better prepared to discuss price.
Determine your specific transportation needs and goals ….for example
- Price- compare net rates (not % off because base rates differ), minimums
- Transit Times/Reliability- including pick up and delivery, terminal services, linehaul
- Inventory Costs- reduced transit time = reduced inventory costs… how transportation adds value
- Product Differentiation- faster, better service as a marketing tool
- Capability/Access- carrier has right equipment in right place at right time
- Security- carriers claim ratio and loss/damage experience
- Relationship- responsiveness and problem solving protocols
Analysis Prior to Negotiation
There is not much advantage to withholding your shipping profile from LSPs. Because the industry is competitive you will get a better deal if transportation providers know what volume they are bidding on and any specific service requirements. If this information is not available to them they will hedge their bets and be less aggressive in their offers. Gather some data and present it. This will give you professional status in the eyes of your carriers. Here is some minimum information needed. Most of it can be found in bill of lading or invoice files.
- Volume/Frequency- # of shipments per day, week, or month
- Weight- average weight per shipment
- Dimensions- standard dimensions, if any… palletized or non palletized…pictures are helpful
- Heaviest Shipping lanes- domestic and international
- Services- priority or economy, express or deferred
- Density- pounds per cubic foot ( for motor carriers)
- Classification- NMFC item numbers (for motor carriers)
- Dimensional Weight or Dim Factor (for air freight forwarders)
- Packaging type- transportation only, display, labeling
- Freight Payment Terms- prepaid, collect, third party
- Control- Who has authority to sign an agreement? Who makes routing decisions?
Request for Proposal/Request for Quotation
A formal RFP or RFQ is an effective way to both reduce transportation costs and gain the value that you need from your carriers. Ad Hoc Logistics can prepare your RFP/ RFQ, get it to the appropriate transportation providers, and even negotiate on your behalf.
Contact mitch@adhoclogistics.com for assistance.