Congratulations, you found a load, but are you getting the best rates for your bottom line on that truckload?
Sometimes finding the load is the easiest part, but finding the right one could be as challenging as finding that specific container at the port (if you don’t know where it is in advance). Don’t settle for a base rate and be willing to do some contract negotiation before you agree to the load. There is a lot of knowledge that can aid you in being able to properly negotiate in your benefits such as knowing specifics about certain freight costs, how the rates vary in and out of a peak season if there is loading or unloading pallets involved in the load, and much more. If these are areas that you are not very knowledgeable in then you may want to consider contacting a broker to negotiate the freight rate. Rates listed on load boards are rarely “all-in”. “All-in rates” cover the hauling cost as well as assessorial fees and fuel surcharge. Brokers generally offer lower rates because that is how they make money. Do not be afraid to ask for a better freight rate, especially if it is good for your business. But don’t just pull a number out of a hat either. Be smart about your freight rate negotiations by paying attention to market trends and broker information.
Four Do’s When Negotiating Freight Rates
I’d like to start with four easy pieces for what you should do when negotiating rates. There’s no complicated secret formula to this. What you’ll find below is a theme of being prepared and informed. Couple that with confidence, and you’ll find success in no time. Let’s get started!
Do Know Your Operating Costs
You can’t negotiate rates effectively if you don’t know the math to engineer profitability. When we talk about operating costs, we’re talking about know how much money it takes to run your business. As a carrier, that means to pay for fuel, maintenance, and your driver at a minimum. You don’t want to accept freight that will leave your company taking a loss.
However, one important factor to consider is customer satisfaction. If you realize a shipper or broker is going to potentially have a lot of freight that interests you, it can be worth making a short-term compromise. Perhaps you take a loss on one load to prove you can perform. Then, that broker can learn to trust you. Once you’ve proved you can deliver freight on time and in good condition, you can begin to request more money for your loads.
Know your operating costs. Know if you can afford to take that approach or not. Understand what rate is necessary before entering a negotiation, and then stick with it.
Do Be Willing to Say “No”
This tip is, in my experience, the one that freight negotiators struggle with the most. It’s easy to find yourself in a couple of different positions where saying “no” is difficult. One such position may be that you simply want to book your loads as quickly as possible. Another is that you may feel desperate, willing to take whatever’s available in order to just get a truck moving. An idle truck and driver can cost you a tremendous amount of money.
I understand the temptation to be quick to pull the trigger. However, even with all of that in mind, you can’t be afraid to say “no” when you have to.
Why? One reason is in accordance with that mentioned above—knowing your operating costs and not wanting to take a loss. You shouldn’t accept a load if the loss is more than you can afford to take.
But it’s not only that. Often, shippers are willing to pay more in order to get their freight moving to meet customer expectations. The phrase “playing hardball” applies here.
So, what’s the benefit of just saying “no”?
Rather than continually going back and forth on price, sometimes the most effective strategy to negotiate is to flat-out say “no.” Granted, it can be a gamble. But if the broker or shipper is adamantly stuck at a price that doesn’t make sense for you, or is borderline, then being firm in your denial can lead them to “blink,” so to speak.
All of a sudden, perhaps an extra $25 or $50 appears. Now the load is tenable for you. It sounds simple, and it sounds risky. But I can personally attest that it works more often than it doesn’t.
Do Know Everything the Rate Includes
Here’s another tip that sounds obvious. What is the rate covering?
Shipment of the freight is an easy and obvious answer. Yet there are often many other costs associated in a transport beyond the cargo and the locations. Make sure you have your route planned ahead of time, as well all the necessary information from the shipper or broker.
Here are a few examples of charges you need to be on the lookout for:
- Tolls: Many routes may pass toll roads or bridges. Make sure you know this, and ask for the rate to compensate for and reflect these unavoidable fees.
- Lumpers: Some locations may require lumper fees to load or unload the truck.
- Fuel Surcharge: In many cases, you’ll want to make sure this is included in your rate.
- Detention: Find out if the pickup and drop off locations have a tendency to hold drivers for an extended period of time. If so, make sure detention pay will be possible and how much it is for.
- Reconsignment: Reconsignment is when a shipment destination is changed after the freight has been picked up by the carrier.
- Stop-Off Charge: Each additional stop a shipper add to a load can have an additional charge since it increases your route complexity and time to complete the job.
- Layover: Are you being asked to stay overnight because the shipper (rarely) or the consignee was not able to load/unload your truck on time? Then you should be paid a layover fee to cover for your expenses and the time you are not productive with another client.
- TONU: Truck Ordered Not Used: The shipper/broker hired you to haul their load, the terms have been agreed to and signed off on, but the truck is cancelled at the last minute for any business reason.
- Deadheading: A deadhead truck has a trailer attached but carries no freight. Deadheading means driving a cargo carrying truck (semi-truck) pulling an empty trailer. Deadheading often happens when a trucker returns or backhauls the empty cargo container to the point of origin. Be careful not to confuse “deadheading” with “bobtailing,” which happens when driving a cargo carrying truck without a trailer attached.
Do Get Everything in Writing
Finally, make sure you get everything about your load in writing. There should be broker and carrier agreements. You may also have some sort of contract negotiation, though that isn’t always included. Finally, you need a rate confirmation. A document stating the agreed-on rate for the shipment is absolutely imperative. The shipper or broker is not required to pay you without signed freight contracts.
Four Don’ts When Negotiating Freight Rates
Now that we have the basics of what you should do, let’s look at what you shouldn’t do.
Don’t Use Miles Alone When Picking Loads
Everything in logistics, from freight pay to driver pay, is dictated in terms of rate per mile. However, this is in important pitfall to avoid when determining what rate is acceptable for freight. There are a couple of reasons for this.
First, you must consider what kind of freight is available coming back out of wherever you’re delivering to. Rates coming back may not be as good as going in. It may be necessary to front load the first shipment to compensate for what the second shipment will be.
Secondly, you must consider possible deadhead miles incorporated by delivering to more remote locations. The rate delivering to the middle of nowhere might be great, but if there’s no freight within 300 miles coming back, you now have to consider those miles in your original rate.
Don’t Overvalue Your Availability
This isn’t to say you shouldn’t value the service you can provide. However, be aware of the availability of freight coming out of the same location that you are. If you see 10 different loads all coming out of the same location, then your leverage to negotiate your rate is significantly smaller. There will be more competition from other carriers also looking to take those loads. Sometimes, finding a truck isn’t an issue for a broker. If the load doesn’t pay what you need it to, then you may be better off looking elsewhere.
Don’t Overpromise If You Might Underdeliver
This is another failure I see extremely frequently in the industry. When there’s intense competition from other carriers for well-priced freight, it’s easy to feel the need to stand out to win the freight. Often I see carriers using the promise of even faster pickup or delivery than any other carrier might provide.
The problem here is that often these promises leave carriers in impossible situations. You’ve offered to pick up or deliver in a time frame that, for one, may not even be completely legal. Or, alternatively, it can happen only if literally everything goes perfectly.
If there’s a lesson to be learned about logistics, it’s this: Nothing ever goes perfectly. Don’t let yourself be put into a position to stain your reputation and remove all negotiating power for future loads.
Don’t Be Afraid to Ask Questions
Finally, knowledge is everything. You might feel like you should just take what’s given and figure it out as you go. I encourage you to ask as many questions as possible and as is necessary. You should know everything you need to know about a shipment before you accept it. Here are some examples:
- What are the fees?
- How many stops?
- What hours do the pickup and drop off locations run?
- Will someone help me unload?
- Can I unload myself if I want to?
- How many loads do you have?
- Do you have freight on this lane regularly?
I could go on and on, but you get the idea. You should ask as many questions as you need to until you’re satisfied that you understand what you’re signing on for.
Our dispatchers are here to help you.
While all of this information is true, reviewing all of the information about a load, asking the brokers or shippers the additional questions, understanding the market, and negotiating can take valuable time from you as a carrier. With over 15 years of experience in the logistics industry, and with instant access to shipper/broker credit reports, factoring and financing solutions, electronic document exchanges, no-app tracking, and many other tools, our dispatchers are ready to help you increase your revenue while reducing your headaches. Contact us at any time if you want to learn more about our dispatching services for O/O or small trucking companies.