The negotiation of freight transportation rates for an independent contractor or as a small contractor is different in
many ways and also has a lot of similarities to the negotiation tactics which are involved for a large carrier. There is a general assumption among most small carriers that large carriers have more leverage on negotiations than the small ones; and to an extent it is true if you consider the following –
Typically large carriers have:
- People managing relationships with the broker/shipper clients
- A pricing department
- The ability to provide volume capacity
- Willingness to turn down freight
- Knowledge of the by lane
It is a fact that small carriers (<10 trucks) make up 25% of the capacity over the road which provide the much needed capacity to shippers (according to MCMIS). Every day, shippers negotiate rates with individuals. You need to be careful and make sure that you don’t fall into most common pitfalls of other small carriers.
Pricing Department
If you are an independent contractor, you will handle most of the work at the pricing department all that is needed is an individual with knowledge of the transportation field and an internet connection. The main work of the pricing department at a big carrier will be to communicate with the market through price, along with the desire to move each lane and ensure that they make good margin to cover the direct cost of moving the truck and paying the driver along with paying their own salaries, insurance, fuel charges etc. and still make a profit.
Turning down freight
It is simple – if you are unwilling to refuse freight, then you might go out of business pretty quickly. Here, you need to prove your strong negotiating power. There are freights, which do require to be moved. If you go and enquire with any successful carrier, be it 5000 trucks or 1 trucks, whether they ever turned down freight because of low freight rates, you will hear a resounding “Yes.”
Relationship with shipper/broker clients
In a good relationship, you can at times refuse some loads and still be offered other loads to transport. It is a relationship where both can benefit from each other, in other words, give and take. If you make the effort to maintain a relationship with a client (shipper or broker) and there is no give in their part, then you will have to break up; keep what you learned from it and move on.
Don’t miss this session by expert speaker M. Dave Malenfant who will help you to predict the behavior of the freight transportation market in 2017. You’ll be able to look at the trends in the market and the impact on future pricing. Dave will explore the range of issues that impact the decisions that professionals in logistics in both the carrier and shipping community need to make when looking at the future.
