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            NEGOTIATION EXPECTATIONS

When companies enter negotiations with carriers, they should have a clear understanding of what they expect with respect to service, deliv­ery, reliability, and competitive pricing.

 

Service: Good customer service and responsiveness are crucial in­gredients to a strong relationship with our carriers. Other services, such as load-tracking, may also be of importance. A local, accessible sales representative is important when problems arise.

 

Delivery: Are the carriers there as promised? Are they flexible with pickup times? What is their delivery performance record compared to their published transit times?

 

Reliability: Does the carrier invoice you accurately, using the proper freight class and applicable discount? Are you charged only for those shipments for which you are liable? Sometimes, collect shipments are invoiced as prepaid, and vice versa.

 

Competitive Pricing: If we can achieve a level of comfort with the first three expectations, then competitive pricing will help us make the final decision. Here it is important to not only look at the discount being offered, but also at the base rates each carrier is using. These base rates vary from carrier to carrier.

TRANSPORTATION PLAN

The transportation plan has two elements that must be laid out: (1) expectations you have from the carriers that serve you (what's in it for you) and (2) how you will meet the carrier's expectation (what's in it for them).

 

Other areas of concern on which to evaluate carriers include their operating ratio, average age of their equipment, and current insurance coverage certificate.

 

If the carrier's operating ratio is over 100, it means they are operat­ing at a higher cost than revenue received. They are losing money. It is our recommendation that your carrier should be operating below 100 to be a part of your carrier portfolio.

 

The carrier's average age of equipment gives insight into their com­mitment to reinvest in their company. If they're buying and maintain­ing their current equipment, they are committing to the future.

 

Make sure you are covered under the carrier's current insurance certificate.

How you will meet the carrier's expectations (what's in it for them)?

It is important in negotiating transportation that you give carriers a background on your company and the primary shipping points. Let them know you want to be a partner with them.

You must collect and present to the carrier all your freight charac­teristics. Define shipping and receiving times. Define your staff's commitments to driver turnaround time. Commit to have loads ready at the times you say they are going to be ready. Have a commitment

to the carrier's drivers. Driver retention is one of the bigger problems in the industry at this point and treating a carrier's driver with respect is nothing more than a business expectation.

Financial information is important to a carrier. They want to be paid promptly. Your Dun and Bradstreet ratings tell the story on your commitment to billings. Exploit your good credit ratings. Show also percentage of claims filed to total shipments.

If you have database expectations, you must define them. Do you expect them to give you a database that you can create your bill of ladings and manifest from? If so, do you expect those to be free? Can they be used across multiple carriers? Or do you have your own internally de­veloped database system that you expect them to help you with? Since this might be the strategy of an internal information system driven by rating and routing, the issues must be brought out in the negotiation.

Things you need to bring to the table: We mentioned before freight characteristics. Let's define those a little bit more.

 

The historical freight data you need to give to your freight carriers to help them determine what kind of program to put forward for you are (1) how much weight, inbound and outbound, (2) the average weight of the shipments, to where outbound, and from where inbound, (3) the freight classifications of your product, and (4) a definition of your ser­vice expectations.

WHEN NEGOTIATING, QUALIFY NEGOTIATOR

Let's ask the question, with whom should you negotiate? In most in­stances, the carrier's sales reps are not empowered to do anything in terms of pricing. Therefore, it is important for you to go as high up the carrier's corporate ladder as possible! It is in the best interest of the shipper and the receiver to actually go out and ask for regional sales managers or even vice presidents to come and visit your company. Let them walk through your company and see firsthand what you have to offer them and why it's worthwhile for them to do business with you. Regional sales managers and vice presidents influence pricing and spe­cial requirements. Don't forget to ask for better discounts. They are out there. If the carrier wants your business, they will go after it aggres­sively. They will have developed a strategy based on the freight char­acteristics you supplied to move your freight profitably.

 

One other thing that matters is size. The smaller the company, the less likely you will be able to entice the attention of the powers that influence pricing.

 

In some instances, using a TPLP as a small company may be worth­while because you can combine the total weights that the TPLP has to gain the best possible advantage. However, as you're moving from a small to a medium-size company, the amount of weight you are moving may increase and be more enticing to negotiate yourself. The larger you are, the more you may have the ability to have clout with the supplier.

 

Weight matters as well. Lightweight, heavyweight, and a mixture between light and heavyweight all determine how you might do your negotiations. Again, with whom you negotiate depends on a combina­tion of size and weight. But remember, the higher up the ladder you go, the better off you are.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 11


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