Saving Time and Money Through Carrier Contract Management (9/30/2024)
Dealing with logistics contracts may take a lot of your time, but ignoring their finer details can cost you money. Here's how a carrier contract management advisor can save you time and money. Most importantly, if you hire the right advisor to assist you with your contract management, then you will still maintain the direct relationship with the carrier, and the advisor will assist you with ensuring you are getting the best terms, rates, and ensuring that the accessorial charges in the agreement with the carriers are fair.
No matter the size of your business, shipping and transporting goods is expensive. Prices are increasing and higher volatility is putting more pressure on firms to find the lowest rates. Not only that, finding the most cost-effective solution takes hours of your time, pushing you away from other aspects of your business that need attention.
Contract management is an essential service because it provides a method to keep these expenses in check. When you hire an advisor, you're still responsible for your logistics department, but you'll have valuable information to help reduce expenses without having to conduct the research yourself.
In this article we are going to discuss the following items that a true expert in the logistics field can assist you with, and usually with little to no cost to your company:
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Benchmarking your current spend and contract language by mode of transportation
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Finding the lowest rates without sacrificing service to your internal and external customers
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Examining the accessorial charges that carriers may charge in detail
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Reviewing your shipping patterns and characteristics
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Maintaining your contract and reviewing annual pricing updates
Benchmarking spend and contract language by mode of transportation
Do you feel you're paying too much for transportation?
The first thing to do is compare your costs and contracts to industry benchmarks to identify inefficiencies. The goal is the find where you're overspending and make adjustments when your contract is due for renegotiation.
This process can take some time, but a contract management provider will look at your logistics spend and offer feedback on your individual situation. From there, you are empowered to make decisions based on those insights.
You have a ton of data available but might not have the time or tools to go through it all to make the necessary decisions. Contract management providers can assist with this aspect as well, turning your data into usable information.
Finding the lowest rates without sacrificing service to your internal and external customers
You always want the lowest rates on your shipping and transportation, but bid management is a lengthy process, especially when dealing with multiple modes of transportation.
A contract management provider can assist you with the bidding and request-for-quote (RFQ) process so you can make the decision that best suits your needs.
The RFQ that you put together should include:
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Details like contact information and deadlines
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An executive summary of the services to be provided by the shipper
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An overview of your business
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Measurement and timeline information
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Assumptions or constraints
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A list of conditions, including penalties, contract length, renewal options, and service levels
Writing this out is time-consuming, but having the assistance of an experienced professional ensures that you don't forget anything that could prevent you from receiving the service you need. They can also assist you with developing qualitative questions for such and RFQ so that you ensure that you are selecting quality carriers in the negotiation process.
Examining the accessorial charges for additional services
There are always additional fees and provisions included in the contract that you need to be aware of before signing anything.
A professional contract management service provider will know what the industry standards are regarding these fees, so you're not left overpaying.
Reviewing your shipping patterns and characteristics
Look at the minimum charges, freight classes, and special circumstances outlined by the transport company. The contract could include information that is different from what you outlined in the RFQ, so it’s a good idea to have an experienced service provider go over the contract before you sign anything.
Keep in mind that there's more than cost to consider when making this decision:
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How is their customer service?
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Do they offer timeline guarantees?
If your goods won't arrive when you need them to, the cost immediately becomes less relevant.
Make sure you won't have any surprises coming your way before making your decision.
Maintaining your contract and reviewing annual pricing updates
Finally, there's your contract. Once the contract is signed, it's easy to forget about it, but all the pricing and language in the agreement should be kept up to date.
In addition, you'll want to know exactly how to negotiate your rates and what impact potential increases are going to cost you when the initial term of the contract comes up or once the contract expires. This takes time and knowhow to analyze the numbers correctly so that you can budget your transportation expenditures properly. Having an advisor assist you with this will speed up this analysis process and also provide you with a different perspective on any potential increases. You do not want to be subject to a general rates increase, so you are left with another year of unfavorable rates or terms. Your initial contract will outline the renewal process, so be aware of how this works before the date arrives.
A contract management service provider will keep an eye on your contract throughout the year and let you know if something needs adjusting or what to expect when the pricing negotiations are upon you.
Getting the most from your carriers
Transportation advisors know this industry inside and out and can assist you in saving time and money throughout the process. These advisors work with your logistics department to create contract language and negotiate transportation rates that minimize the organization’s expenses.
Resource Logistics Group can assist with your bid and contract management process, identifying areas where you could negotiate better terms with your transportation providers. We have experience working with carriers, shippers, and third-party logistics firms, helping us to get the best results for our clients. Contact us today for a free benchmarking analysis of your LTL and FTL pricing and contract language.
