Contrary to what some may think, carriers do not have a uniform system for determining the level of shipping discounts and incentives offered to one shipper versus the next. Numerous variables contribute to the carrier’s process of extending any price better than their tariff rates. Certainly there are shipper characteristics that are commonly considered when a carrier is evaluating the level of discount to offer; however, carrier pricing agreements are in large part custom and unique to the specific shipper for which they were created. Consequently, negotiating carrier discounts can be a relatively subjective process.
In order to maximize their margins, a carrier’s objective will be to limit discount levels, while still successfully winning (or retaining) the customers business. To that end, a carrier will typically use “relationship” and “value ad services” as their compelling argument(s) against further rate improvements. Shippers that have had a long-standing relationship with the same carrier and/or an above average level of integration with their carrier are often the ones getting the least aggressive shipping discounts.
BEST PRACTICE SUGGESTIONS:
• Don’t let a “great” relationship with your carrier get in the way of your efforts to negotiate maximum carrier discounts. Great discounts are an important part of a great relationship!
• Let your carrier know that value ad services and solutions will be welcome in the negotiation process but will be considered separately and secondarily to great discounts and incentives.
• Get a second opinion…it never hurts! Companies like Source Consulting, who have keen analytic tools and carrier pricing knowledge, can be very useful as a sounding board to determine whether or not the “great” deal being offered by your carrier is really great or not.
Author
Rich Harkey
Rich Harkey
Senior Strategy Manager
Rich Harkey is a results-driven professional with extensive experience in the logistics and supply chain industry.
As the Senior Strategy Manager at Lojistic, Rich leverages over three decades of expertise to help businesses improve their shipping strategies and reduce costs. With a deep understanding of the requirements of shippers and the operational intricacies of carriers, he excels in everything from optimizing business rules and managing carrier invoices to negotiating carrier contracts.
Rich's comprehensive knowledge of the logistics industry, combined with his strategic insights and passion for data analysis, has enabled thousands of companies to gain visibility into their shipping expenses, driving impactful results.