Shipping costs are on a consistent upward trajectory. This puts extra emphasis on the need for freight rate negotiation as a way to lock in lower contract rates and protect your bottom line.
Digitization and the increasing use of data have changed every aspect of business. The best practices around how to negotiate freight rates have evolved in recent years, and it pays to keep up with the changes. That means taking a data-driven and automation-heavy approach to shipment rate negotiation.
Processes such as engaging with multiple bid participants and performing accurate, timely re-rate analysis are too complex to handle manually. This doesn't mean your company should avoid them — on the contrary, they're critical to locking in a lower rate for each freight contract. You'll simply need to embrace modern logistics technology.
The following are four recommendations for negotiating freight rates amid today's challenging, fast-moving supply chain conditions.
1. Use a Transportation Spend Management System
Having a technology platform at the heart of your supply chain efforts is simply the table stakes for high-level logistics management today. A Transportation Spend Management System (TSMS) is a tech tool designed with a specific focus on financial management and budgetary optimization.
A TSMS delivers automation and data visibility, allowing you and your logistics partners to achieve a level of freight cost optimization around contracts that would be extremely labor-intensive if handled manually.
The business intelligence and analytics features included in a TSMS let you take either an organization-wide bird's-eye view of your spending or zoom in on the individual shipment level. The platform also allows you to consolidate, automate and verify your carrier payments, saving manual effort and promoting accuracy.
Your TSMS solution should be overseen and managed by an expert partner organization that combines industry experience with a tech-forward approach to freight cost optimization. This partnership and the technology platform itself serve as the base for your freight contract optimization efforts. Once you have visibility into your expenses and automation of common processes, you can delve deeper into the numbers.
Learn about the tech-enabled services available from Zero Down Supply Chain Solutions.
2. Perform a Freight Audit
Auditing your freight contracts is a way to gain a new level of insight. This automation-heavy, expert-led process helps you ensure every agreement is being followed as written. It's common for extra expenses to slip into logistics budgets, due to issues like incorrectly applied shipping rates, duplicate charges or unclaimed refunds for missed service levels. An audit points out these oversights.
To truly get to the heart of freight spending, an audit needs to examine costs down to the invoice level. In today's digital supply chain, the number of invoices is daunting. This volume makes automation essential: Attempting to manually audit all of your company's freight invoices would be prohibitively time-consuming.
Updating your audit approach may be a valuable move even if your current auditor appears to be performing up to a high level. By receiving a proof of concept on a new, tech-enabled solution, you can discover opportunities for savings that were going unrealized.
Auditing is an initial method for getting control of your freight spending. Once you've completed an audit and discovered all the potential savings in each freight contract, you can take steps to renegotiate. Equipped with accurate, up-to-date insights about a contract and the carrier's performance, you can renegotiate that agreement from an advantageous position.
See how Freight Auditing works in detail.
3. Perform Freight Optimization on Your Contracts
The crux of freight savings comes during the renegotiation process. This is your opportunity to win concessions from your freight carriers and earn budgetary relief to counteract rate increases. Shippers consistently charge more through overt price hikes and more subtle added fees and surcharges. If left unchecked, these rising shipping rates can have a massive cumulative effect on your logistics budget.
Ideal freight rate negotiation is a collaboration between your team and a savvy partner organization that can provide constant, tech-enabled support. Every proposal should be carefully shaped to deliver maximum rate reductions and favorable terms in your next contract.
The ZeroDown Supply Chain Solutions team takes a six-step approach to freight rate renegotiation called AAAAIM:
- Assessment: Creating a baseline agreement based on current contracts to set the groundwork for optimization.
- Alignment: Building a collaborative strategy and roadmap to ensure the renegotiated freight contract suits your business's goals.
- Advisement: Navigating the bidding and counter-proposal step, negotiating to receive terms that fit your vision.
- Agreement: Empowering your team to strike the best possible freight contract deal with the ideal carrier for your needs.
- Implementation: Putting the agreement in place and making sure the contract is implemented in line with its stated terms.
- Maintenance: Monitoring the freight carrier's performance over time to find new savings opportunities and ensure ongoing adherence to the terms.
With our proprietary FreightOptics TSMS, Zero Down Supply Chain Solutions can lead data-driven, automation-enabled contract negotiations. This allows you to expand your scope and find the right carrier for you, managing a multiple-bidder process to lock in the best rates and terms.
See the value of high-quality Freight Optimization for your business.
4. Stay Aware of Changes Over Time
Contract negotiation and optimization can't be a one-time process. Shipping companies implement rate changes and implement new fees often. You need to stay aware of these shifts, as well as adjustments in the overall supply chain landscape, to make sure you're still paying optimal freight costs.
If there's potential to negotiate a better rate or reclaim money lost to improper charges, you should recognize the opportunity and be ready to seize it. This ongoing ability to optimize your logistics costs over time is a compelling reason to maintain your expert-aided, tech-enabled approach to supply chain management for the long term.
Negotiations don't just lock in the lowest possible rates — they can address other terms in the contracts, ensuring you receive the highest possible quality of service. Over time, you can pass the value on to your customers, positioning your company for lasting success.
In an era when shipping costs are persistently high, your ability to negotiate optimal terms can represent a competitive advantage. Businesses that let extra charges pile up may find themselves with holes in their logistics budgets, hurting their long-term performance.
Ready To Optimize Your Freight Rates?
Working with Zero Down Supply Chain Solutions is the No. 1 way to improve your freight contract rates and terms. This is because we combine logistics expertise and experience with a suite of technology tools designed to derive maximum value from every link in your supply chain.
Our approach to transportation spend management brings freight and parcel contract analysis and negotiation under one roof, so you can optimize all these agreements efficiently. The FreightOptics TSMS delivers visibility into each contract, invoice and shipment, along with the ability to analyze performance at the carrier, region, time frame or shipment level.
Saving money in the supply chain can play a major role in overall efforts to keep your costs under control and safeguard your bottom line. Zero Down Supply Chain Solutions puts your company's situation, needs and goals front and center, making sure your optimized contracts target your specific objectives.
Contact us now and see what freight optimization means for you.
