Logistics professionals all across the UK are finding themselves in the same boat: Tasked by senior management with reducing transport costs, while your carriers demand higher rates. As capacity becomes tighter and those higher rates become harder to deny, our jobs really start to become difficult.
Shippers who want to reduce their costs without a tragic fall-off of service levels need to source their transport very carefully. There is generally some room to negotiate prices though, if you understand your options.
Keep your eye on your total LTL freight spend, not individual rates
All too often, companies base their LTL freight negotiations on getting the lowest possible rates, not a package of rates optimised to the way they use LTL transport. You should really be considering ways to consolidate inbound and outbound shipments, timing and traffic patterns, carrier reliability and the probable of any failures on their part, and how all these factors will affect your actual annual spend with this carrier. That is the figure you need to optimise for, not the ‘rate’.
Arriving at this figure may not be simple, of course. A good analytical package or rating application could be a big help. With the right software, you can conduct best and worst case scenarios and make more reliable assumptions about performance and costs. Once you generate an accurate cost/service formula you can see which offers are really the better ones for your company.
Core LTL freight carrier or best LTL freight carrier?
The ‘core carrier’ concept has seen better days. Some larger shippers do still get substantial leverage from their purchasing power with a preferred or core carrier, but most, especially smaller or medium sized companies, just end up using sub-optimal carriers for much of their LTL freight. Worse, the core carrier approach can pressure the carrier to handle loads that are unfavourable or inefficient on their networks.
The ‘best carrier’ or ‘right carrier’ to LTL freight involves keeping a variety of carriers on the books, and routing LTL freight through whichever carrier would be most efficient or desirable at the time. In the final analysis the carriers can offer better rates because they know they will be handling the most efficient loads and routes, and all of you will see higher margins.
Vet your LTL freight carriers thoroughly, and press for a strong contract
Shippers rarely regret spending the money to have a solicitor vet a carrier and contract both before signing. Too many shipper based contracts operate with serious flaws that aren’t apparent until something goes wrong. Once it does, the protection you thought you had vanishes, or the carrier turns out not to have the resources to honour the contract, and it is still essentially worthless. Only good LTL freight contracts produce real security.
Of course, taking on the right warehousing and distribution partner can simplify matters substantially. A good warehousing and distribution partner will be able to sort out a lot of the finicky details for you, and will have resolved most of these matters for themselves already. Remember that you don’t have to do it all alone! Turning to a warehousing and distribution expert can be the key to lowering your transportation spend, and improving actual on the ground performance.