Operating costs are rising for LTL carriers due to a number of factors – the driver shortage, rising pay, and aging equipment. Spot market and contract rates have both risen to compensate for these extra costs, however, contract rates rose higher than spot market rates and remain higher. Knowing how to get and negotiate the lower LTL freight rates is important if you want to save costs.
This is unusual since promising freight volume ahead of time typically leads to freight savings.
So, why have contract rates risen above spot market rates? Because contract carriers bought a record number of trucks in 2015 and boosted driver pay, all in an effort to regain capacity and reclaim market share that had been lost to spot market providers.
These rates aren’t going down anytime soon, as operating costs continue to climb. Unfortunately for shippers, the transportation industry has a serious shortage of capacity and most companies find it necessary to pay higher LTL contract rates to get truck capacity. How can you avoid paying such high contract rates for transportation?
Here are 3 tips to negotiate lower LTL freight rates:
Use the CzarLite Tariff
The CzarLite tariff for LTL freight is independent of trucking companies and is the transportation industry’s base rate standard. Most carriers develop their own tariff and encourage you to use it. For example, a carrier may offer you an 80% reduction on fuel surcharges if you use their base rate, which sounds great, but their base rate will likely end up costing more than the savings. The CzarLite tariff transparency into negotiations by providing you more visibility into costs compared to other carriers.
Utilize LTL Guaranteed Service Levels
Using guaranteed freight services is a way to negotiate lower base rates or GRIs in the future. Guaranteed freight is when an LTL carrier guarantees a specific service level. Carriers prefer to operate these
services – it gives them an opportunity to acquire more freight spend. With guaranteed freight, a shipper immediately spends less time on track and trace operations. By paying for a service that carriers want to perform, you gain preference and can leverage lower rates on standard shipments, fuel surcharges or GRIs during future negotiations.
Highlight Attractive LTL Freight, but Don’t Hide Unattractive LTL Freight
Shippers should highlight attractive freight during rate negotiations. Carrier-friendly freight, in general, allows carriers to utilize their truck space effectively. Dense, small, and stackable freight that fits properly on a pallet will be easy and efficient for a carrier to haul. It’s also important to disclose information ahead of time about freight that will be difficult or inefficient to haul.
Eliminate any surprise charges and keep the carrier compliant with all state and safety regulations. LTL carriers need to know their risk liability before hauling freight because this affects their view of the value and cost to carry the freight. Carriers are rated by a CSA system by DOT. Losing rank in CSA due to compliance issues the carrier was not notified about can hurt their chances of getting new business, and you can be sure they won’t want to give you any discounts.
Learn more about reducing transportation spend in post 7 Steps to Reduce Freight Costs.