Negotiating Your LTL Shipping Carrier Contracts With a Helpful TMS

Using a transportation management system to automate data collection and organization will help shippers secure more favorable LTL carrier rates

LTL shipping rates increase every year. Fuel costs and overall inflation mean this service will never become less expensive over the long term. Dealing with these expenses is part of doing business, but there are some steps shippers can take to reduce their costs.

One of the most efficient ways to secure more favorable contract terms is to collect and analyze your shipping data and compare it against what carriers can offer you. This information is a powerful lever for moving the negotiations over your next deal. 

In the past, analyzing transportation data requires a lot of manual work to gather the numbers and analyze them using a spreadsheet. Today, a transportation management system (TMS) can do much of the legwork for you, collecting shipping data from multiple carriers, organizing the numbers in a consumable manner, and running preliminary analyses. From there, all that is left is the contract, and you will have additional leverage in your negotiations thanks to this information.

Here is a look at how an efficient TMS can help your business.

Key Takeaways

• Securing favorable LTL shipping rates get more difficult every year

• Collecting data and building your knowledge base to negotiate the next deal

• Bring all this information together to negotiate a better deal

• A TMS system can make the process easier

Data collection

Before sending out a request for proposal, you will need to have your data ready to go. A lot goes into securing the lowest possible LTL rates, and each carrier will provide quotes based on the information you submit. 

Things like your shipping frequency, the tonnage you ship, your shipping schedule, and your shipping destinations all matter when sending out RFPs because LTL carriers will base their proposals on this information. 

Carriers will also want to know how quickly you pay your bills, your specific freight descriptions, and, potentially, how much you are currently paying for shipping.

Of course, this is a lot of information to collect manually, particularly if you are a larger company that ships globally. However, a reliable TMS will manage it all for you and ensure that it is easy to include in your RFP.

Your TMS can also submit this data to carriers, often at the push of a button, eliminating even more manual work.

Rate comparisons

Coming up with a fair price is the next step once you have seen what carriers are willing to offer through their initial proposals. Technology can also assist through this stage, as you will want to gather information on carriers to see if they can meet your needs. 

Here are some of the data points you should look for about the carriers you are considering:

• Financial performance

• IT capabilities

• Fleet size

• Type of equipment used

• Level of customer service

Only move forward with carriers that can meet your expectations based on your company's shipping profile. For example, if you are sending most of your goods between New York and Los Angeles with stops in Chicago and other Mid-West locations, it would not make sense to pursue an LTL carrier that keeps most of its fleet running between Miami and Dallas. 

This stage is also where a dependable benchmarking service is essential, as it allows you to compare these numbers against the rates other shippers pay.

Negotiating the new deal

Now that you have your data collected and the proposals are in, it is time to negotiate your deals. 

Before entering a negotiation, analyze each bid and run through the optimal pricing and service scenarios. Compare each proposal against your shipping needs to develop a sense of fair pricing and service-level agreements along the way. 

This step is also where you should conduct sensitivity analysis and check carrier references for those who have made it this far.

Now you can use this information to secure favorable rates. It is often best to negotiate these deals face-to-face because that is how you develop a relationship with your carriers. These meetings allow you to get to know each other and help build trust. 

These in-person meetings are when you will likely speak with the carrier's director of pricing, and, hopefully, you can use the data you have collected to secure lower rates on your shipments. Of course, you will negotiate with multiple carriers, so use competing offers as leverage before signing a deal with the best prospect.

Your negotiation process should also ensure the carrier is willing to work with the tools you’re using. Your TMS is how you track and manage your supply chain, so any vendors should be compatible with your software of choice.

Selecting the right TMS

The TMS you choose should automate as many tasks as possible, allowing you to collect shipping data and use it in a meaningful way without adding to your workload. In fact, your TMS should reduce your workload by eliminating menial tasks and taking the strain off your back-office staff. 

Resource Logistics Group has a transportation management system that can help you through the entire shipping process. This software collects and organizes data efficiently, helping prepare you for your LTL contract negotiations. Contact us to learn more about our TMS or to request a free benchmarking.