5 Tips for Negotiating Better Shipping Terms

By April Maguire

4 min read

Do you operate a business that deals in physical goods? If so, then you probably already know how important it is to ensure your customers receive their orders on schedule. Still, finding the right freight carrier is often easier said than done, and going with the cheapest choice can be a mistake. After all, it doesn’t matter how affordable the shipping rates are if you can’t trust the company to deliver your goods on time and in the condition that they left your facility.

Fortunately, there are steps you can take to minimize shipping costs while protecting your company’s reputation. Here are five tips for negotiating better shipping terms for your small business.

1. Understand What Affects Cost

You can hardly negotiate favorable shipping terms if you don’t know what factors affect rates. Along with obvious elements like the quantity, weight and destination of goods, factors affecting shipping costs can include whether or not goods are considered hazardous, or the number of miles between stops. Additionally, freight companies may alter their quotes based on road conditions, required vehicle changes, the number of staff members involved in shipping and how far drivers need to travel out of the way to refuel.

While new business owners may be tempted to negotiate for the entire cost, it’s often more effective to try to lower the cost of these individual factors. Do your research regarding the average price associated with each of these components so you can recommend a figure that’s well within reason. Additionally, you should assess your own shipping information before meeting with a carrier. By reviewing your invoices, you can develop an improved understanding of current transportation costs as well as your typical package weights and destinations.

2. Research the Competition

It’s tough to negotiate with shipping companies if you don’t know what the competition is charging for the same services. Before entering into discussions, take the time to view benchmarks from other carriers. Sites like ShipGooder let you compare rates on local, regional and national shipping couriers for free so you can feel confident that you’re getting the best deal.

When you know what the competition is charging, you can counter false claims that you’re getting a discount when you’re really paying a premium on services.

3. Develop a Relationship

As a small business owner, you probably know that developing relationships with your suppliers enables you to secure better deals. The same is true for your freight carriers.

If you want to negotiate better shipping terms, take the time to get to know your carrier representatives. Rather than waiting for a billing issue or shipment problem to speak to your carrier, contact him or her a few times throughout the year to talk about options and value propositions. This could include leveraging a new technology or utilizing less-than-truckload shipping, which is used for shipping smaller amounts. You may be surprised at the number of opportunities to reduce your shipping costs without sacrificing speed of delivery or quality of service.

4. Create a Request for Proposals (RFP)

Once you’ve completed your research and discussed your options with your current carrier if applicable, it’s time to draft an RFP. RFPs encourage shipping companies to solicit your business by submitting a sales proposal. Once you have received proposals from several local freight suppliers, you can easily compare options and determine the best carrier for your company’s needs.

In drafting your RFP, be sure to include enough information about your business so that the carrier can provide the most accurate quote. Along with a profile detailing your product and service offerings, specify where the majority of your items will go and how often you expect to ship. Be specific about what you expect carriers to provide, as such specificity improves the odds of the submitted proposals meeting your needs and expectations.

5. Ask About Discounts

When negotiating for shipping terms, ask carriers about incentives that go along with their services. Because competition among shipping companies is fierce, carriers are often willing to offer incentives to clients who are willing to change providers. In fact, they may even subsidize or cover the cost of the switch.

Additionally, many shipping companies offer discounts based on volume and other factors. As your business starts shipping out more or heavier packages, you may be able to negotiate a lower rate. You should also ask about association discounts, as a number of carriers offer price cuts based on your membership in various groups and trade organizations. You might even be able to pass these discounts onto your customers.

If you want to make sure your customers receive their purchases on time, forming an arrangement with a trusted freight carrier is crucial. By doing your research and considering all possible options, you can minimize shipping costs while showing your valuable clients that they can trust you to deliver as promised.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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