Transportation Contract Negotiation (Rates and associated charges) Spend Reductions


Reductions ranges from 8 to 30 percent of the identified spend and can range up to 50 percent in some instances. The following table shows our more recent successes by industry classification and transportation mode, with the realized savings in actual dollars and as a percent.

A Fresh Approach to Transportation Negotiations

Our approach to the transportation service provider Request for Proposal (RFP) process is somewhat unique. As a result of our industry experience, we suggest to the service providers exactly what we are expecting in relation to the freight classifications, base rates, fuel surcharges and schedules, other assessorial charges, the percent discount, and other related expenses. The overall client cost reductions using this methodology range from 8 to 33 percent and have reached 50 percent in some cases. This methodology is also applicable to transportation service providers (audit/freight payment organizations, etc.).

The process begins with the analysis of a representative sample of data from all of the client’s divisions/locations that are participating in the transportation RFP. After analyzing the various lanes, frequencies, freight classifications, tendering and payment methods, etc., the targets for the RFP are developed and the overall savings potential is identified.

Example Data Requirements and Reduction Potential Example Data Requirements and Reduction Potential

Opportunities for cost reductions and improvements of the client’s internal process are also identified to reduce internal and improve procedures, which also help when selling the freight to transportation providers.

Example Transportation Best Practices Example Transportation Best Practices

We then develop the strategy for contacting the transportation providers and selling them on the benefits of handling the freight in the RFP, and why the cost reductions are reasonable/agreeable to all parties. Often this entire process can be completed with the contracts signed and implemented in less than three months (often in one month). The achieved savings finance the project many times over in the first few months and set up the client for future negotiations in the coming years.

Example Project Plan Example Project Plan

The developed RFP consists of a letter of authorization, the suggested pricing, classifications, surcharges, etc., along with a representative sample of volume data.

Example RFP Example RFP

All of the RFP responses are gathered and evaluated based on the pricing elements and the service provided by the carriers and compiled into a single matrix for analysis.

Example Evaluation Matrix Example Evaluation Matrix

Establish is a supply chain consulting firm focusing on supply chain strategy, transportation consulting services, warehouse design & improvements and supply chain audits & analytics.