How To Effectively Negotiate Reduced Fuel Charges With CarriersWritten by Paul Forand
How much are you paying in fuel charges on your shipments? Are you keeping track? Fuel prices can fluctuate wildly, and so can the charges passed on to you by carriers.
Fuel surcharges have become a major source of income for most carriers, and it's very much a 'captive audience' situation. Competition for cargo space has made it so that the carriers have the upper hand with pricing, and can dictate their own terms and still find buyers.
That said, it's not impossible to negotiate for lower rates. Sometimes, just placing a call is all that's needed, although it's generally better to do some legwork first...
What You Need To Negotiate Lower Fuel Costs On Shipments
1 - Leverage
If you have it, the process is simple. If you don't, it's not. A carrier might be willing to offer you a better discount to keep your business if you’ve had a strong relationship with them and they deliver your freight regularly.
However, if your company hasn't been consistently using the same carrier for at least a few years, they're not going to have a real reason to consider your company an important customer. Likewise, if the shipments aren't large, that's space that can just as easily be filled by any number of other companies.
If they truly have something to lose by losing your business, they'll likely talk lower rates. If not, they won't care if you threaten to switch vendors.
2 – Collaboration with Carriers
Another way to make yourself more valuable to carriers is by doing everything you can to make their lives easier. Have standardized systems so there are no surprises on their end, or unexpected handling fees. Use consistent times and schedules for loading and unloading, and work with the carrier to accommodate their needs when possible.
In some cases, you may even be able to negotiate lower fees by directly linking your systems into theirs. If the default shipping options at your POS or Website all go to one carrier, that carrier is usually going to be willing to negotiate.
3 - Business-wide Consolidation
Are you large enough to have multiple departments all making their own purchasing/shipping decisions? Centralize it! The prospect of getting an entire company's business will be far more attractive to most carriers than merely getting an individual shipment.
Plus, centralized consolidation of your shipping allows for much easier optimization of your processes, so you can often hit two targets with the same shot and save money on your end while also negotiating lower fuel rates.
4 - A 3PL
If you lack sufficient leverage or consolidation potential, the best remaining option is usually to bring in bigger guns on your side. Third-Party Logistics firms buy freight in bulk and therefore have far more pricing leverage.
When a 3PL buys space on behalf of all their clients at once, it creates significant savings beyond what a smaller company could negotiate on their own.
In fact, a good 3PL can often bring savings across ALL areas of shipping. If you'd like to learn more about the potential here, just contact ReTrans Freight today for a cost-savings analysis!photo credit: MoDOT Photos via photopin cc