Freight Brokers are constantly negotiating with carriers. Unless there are rates in place with a carrier already each load will have to be negotiated. Some times there are rating tools available that will give the freight broker an idea on where to start but many times any past rates are out the window because of supply and demand of trucks and the cost of fuel.
Last year we saw freight moving east to west for around 1.25 per mile. This summer it is up to about 2.50. Obviously customers are going nuts and trying to figure out how to move there products for less. Even with higher fuel costs there are some ways to negotiate a good rate with a carrier.
Know where the freight is going – Freight moving east to west is less then west to east. Most of this is driven by product and importing of products. There is a huge demand for trucks ont he west coast and this drives freight costs up. When shipping to the west coast if you keep this in mind you can usually get the carrier to move lower on the freight rate.
- Know how mush it costs to run a truck.
Fuel Cost 0.60 Maintenance 0.25 Truck Payment 0.35 Driver Costs 0.35 Per mile total 1.55
Based on this info the company has not yet made a profit on the truck at 1.55 per mile. But keep in mound that costs go down with companies that travel longer distances. This information can be used to negotiate with the truckload carrier when you have a long haul and need the carrier to move a few dollars down to secure the rate with the shipper. For a good article on figuring costs per mile check out this article by OOIDA – Figuring Cost Per Mile
- Let the carrier know when they are high – The carrier usually wants the freight also. If you have a reasonable rate then let the carrier know where they need to be in order to secure the business.
- Does the carrier need to get home. Sometimes truckload carriers just want to go home and will take a low per mile rate to not have to deadhead back home for no money.
- Be professional and know your load info – The carrier have a choice and if you seem like you don’t know what is going the carrier will not want to work with you.
Truckload carriers usually rely on the broker to tell them the rate. It is always strange to me but when you post a truckload and a carrier calls they never will speak about the rate first. First thing they want to know from you is the load details and most importantly what is what is the truckload paying. I have tried asking a carrier what they would charge but they get pretty annoyed so I stopped asking. First thing is to do some research. If your company has some historical data then you can find out what the lane paid last time and use that as a base. If I have no idea what to pay a carrier then start with a rate of 1.25 per mile. You will find out really quick if that is a good rate or a bad rate. If the rate good the carrier will be very quick to let you know they want to get set up on it. If they rate is bad they will get off the phone quick.
If the rate is too low try and keep them engaged and ask them what they would move this truckload for. This will give you an idea of what the lane is paying. Remember the carrier is trying to maximize it’s revenue so don’t feel bad when they tell you a really high rate.
Can you pay 100.00 more? A lot of times even if you have a good rate the carrier will ask for an extra 100.00 on the rate. Don’t let this bother you. The carrier is good at his job too and this is generally a small enough amount that a freight broker will agree to it and not have to raise the rate to the customer. More then once I have let this bother me and I would get a little emotional and when you get emotional you lose a negotiation. I have lost a truck over $25 and I really should have just paid the money rather then continue searching for a carrier. One way to handle is tell the carrier you will need to ask the customer for this rate increase and you will call them back. If your rate is fair the carrier will generally agree to the rate if you can set it up for them right then.
Make sure you have all the information about the load before you try and negotiate.
What is the freight?
When does it pick up?
Does it need an appointment?
Does the driver need to unload?
When does it deliver?
How much does it weight?
Any special requests or long loading times?
Find out where the price needs to be. Usually the shipper will know the amount they are shipping it for based on previous shipments. If you can get this info you can figure out what will be possible to pay the carrier it will help a lot with the carrier. When in doubt let them
Cheap Freight is not good Freight – As a broker our job is to manage shipments for the best price but hammering the cost down by not paying carriers enough to survive is not good business and you will usually get what you pay for. Pay attention to averages and know the market as best you can. Carriers are the lifeline for a brokerage business so we need make sure we pay them fairly while offering our customers a value for their dollar.