Why Your Freight Costs More: Lack of Leverage With Carriers

Written by Paul Forand

freight-warehouse-storageThese days, a business needs every advantage it can get when dealing with rising freight costs.  With cargo often meeting or exceeding capacity in most areas, difficulty finding/keeping good drivers, and increasing government regulations, carriers are demanding a premium for their services. After all, there's no real alternative.

The largest of companies, like Walmart, are working to minimize price increases through their collective freight volume. They are sometimes able to get sweetheart deals on freight because they're buying in huge bulk, which can drive their prices down... but it makes it even harder for smaller businesses to compete.

That's why more businesses are turning to established and qualified third-party logistics firms (3PLs) to help them with their freight.  They have the ability to leverage far better freight rates than smaller companies can negotiate on their own.

Ways A 3PL Brings Real Price Leverage To The Table

1 - Bulk Purchasing

Very few companies can ship in the sort of bulk needed for large discounts, and your typical freight broker generally acts as a pure middleman. You go to him with freight, and he researches prices and carriers and buys whatever's cheapest at the moment. However, the carriers can change from day to day, since they are making many smaller, individual buys with little or no commitment to carriers.

A quality 3PL, on the other hand, will buy for many clients at once.  By combining all the freight volume of their own clients, they create massive price leverage with huge bulk buys.  The result is lower freight costs across-the-board.

2 - Long-Standing Relationships

Quite a few new 3PLs have entered the freight brokerage market thanks to new technology. However, these new players lack two key things: Contacts and credibility.

When you hire a 3PL with an established track record that's been in business for decades, you're also hiring their network.  They've spent years building relationships with the carriers and proving themselves to be long-term business that the carriers can depend on.  

That sort of long-standing history brings its own rewards in the form of deals that newly-formed brokers simply cannot make. When a 3PL has a good track record with carriers, everyone wins - especially their clients.

3 –More Benefits Than Just Ratesfreight-shipping-cost

Since many 3PLs buy freight in multiple individual purchases, they aren’t able to offer shippers any additional benefits beyond a freight rate. A quality 3PL, however, is able to leverage their volume in order to negotiate beneficial items other than just rates for their clients, such as optimally negotiated fuel surcharge deals and heightened freight claims liability limits.

3PLs Can Save Shippers Money

That's what it boils down to.  When combined with all the other services they offer, a 3PL can bring huge savings to virtually any company's shipping operations. 

For a free cost-savings analysis, contact ReTrans Freight today