How to Negotiate Freight Contracts
Freight companies provide transportation internationally, domestically and within the same city. They ship everything from tangible products to liquid food items to hazardous chemicals. Businesses rely on freight companies to transport inventory from suppliers and to ship finished products to customers. In both cases, the company signs a contract with the freight company to provide this service. Companies who successfully manage their freight costs learn how to negotiate with these businesses.
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Instructions
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Research current rates. Determine your freight needs. List your standard routes, frequency of shipments, the size of a typical shipment and any special requirements, such as temperature control. Email competing freight companies asking for price quotes to meet your freight needs. Review the quotes and identify the highest and lowest prices in the market.
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Set your own parameters. Before meeting with the freight company, determine what your limits are. Find out how much your company budgeted for freight costs. This represents your starting negotiation point. Determine the maximum amount your company can afford for freight charges. This represents the ceiling parameter for your negotiation.
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Ask questions during your meeting with the freight company to determine its high and low parameters. These questions include asking what the company's best price is and what it includes at that price. Ask about the difference between shipping a full truck of product versus a smaller shipment. Inquire about handling fees if the driver helps unload the truck.
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Wait for the provider's offer. Ask about specific services provided by the freight company. Ask the freight company how these services impact the price.
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Counter with your offer. Consider the services offered by the freight company and the price offered. Create a revised offer with a lower price. Drop any services that you don't need.
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Repeat the offer and counteroffer process until you reach an agreement.
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Request the freight company to draft a contract and send it to your attention. Sign the contract. Make a copy. Send the original back to the freight company.
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Tips & Warnings
Don't automatically negotiate for the lowest cost. Make sure the company provides reliable transportation and arrives at each destination on time. Talk to current and past customers of the freight company. Ask them how often shipments arrived damaged and how the company dealt with those situations. Ask past customers why they no longer use the service.
