July 7, 2022 Deyman Doolittle
How to Approach Rate Negotiation in Logistics
Negotiating rates with carriers is something shippers know all too well. Even with a great relationship, it’s business. The carriers only goal is to maximize their profits, not yours. So, you have to come to table prepared. Come with numbers, goals, data, cost modeling, the more information the better. When it comes to carrier contract negotiation the party with the most information holds the greatest negotiating power.
What are rates in logistics?
Rates are exactly what they sound like. The price. When it comes to logistics, they are the price at which a specific type of parcel is delivered from one point to another. The rate varies depending on the kind of package, weight, service level, distance traveled, and type of delivery (residential or business). These rates are often negotiated as part of a contract with a carrier to get access to more discounts.
What is rate negotiation?
Rate negotiation in logistics, also known as price negotiation, is a stage in the sales process where customers are interested by not necessarily ready to buy (or re-sign). This is usually due to the customer wanting a better price or additional value.
Now that we know what rates are and what rate negotiation is, the next question to ask is how to negotiate rates with carriers?
How to Negotiate Shipping Rates
The question is simple, the solution is a bit more complex. First, you must build a strong relationship with your account rep. Take the time to get to know them, show them they are appreciated, and build a relationship founded in mutual respect. Then you can get into the negotiation.
Start by doing your research and making sure you know what you want from the negotiation. Know what discounts the carrier offers and what hidden fees or surcharges might be sneakily wedged into the contract. Finally, get the data to back up your request. Work with a third-party to run analytics, develop benchmarking, and create cost modeling and rate simulations. This way, the data proves the negotiated rates you’re asking for are valid and reasonable.
How to Negotiate in Logistics
While in-person negotiations, sitting around a table, and not leaving the room before terms are agreed to can be great if time allows, sending a price negotiation letter to suppliers can be more time effective.
It will likely take more days to get to a signed contract, but the time spent handling the back-and-forth communication will be less. You could go old-school and send a letter, but we recommend sending a price or rate negotiation email.
Price Negotiation Example
Thank you so much for the proposal you sent over.
My team and I have reviewed the documents and were very happy with what we read. Unfortunately, we noticed that the price you quoted is out of budget.
For us to move forward, we request a rate that is X% lower than your original quote to reach a final price of $XX. While we respect the benchmarking that you provided, we were able to come this number using cost modeling technology and comparing live market data. X, Y, and Z. If you cannot offer this price, we unfortunately will need to transition to another carrier.
We hope that you can accept this offer so that we can continue our business relationship. Please inform us of your decision by XX/XX/XXXX.
Rate Negotiation is Easier with ShipSigma
We are experts in carrier contract negotiation, we do it every single day. With our ai-powered platform, we know how much we can save you before we negotiate. We go beyond benchmarking and provide cost modeling and rate simulation so that you know exactly how your rates stack up.
Our mission is simple, we’re here to save you money. Our customers see an average of 25.2% savings. Thinking about negotiating your contract? Contact us today to get started.
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