3 Ways to use Analytics to Negotiate Shipping Rates

In a data-driven world, businesses are increasingly using rich analytics to make better decisions. Read on to see how your businesses can use analytics to negotiate better shipping rates.

Carriers have the data, shouldn't you? 

Shipping spend is a huge and complicated expense that can eat up 2.5%+ of sales. If you ship a lot of goods you are no strangers to negotiating rates with carriers, but may not have the best tools to do so. The good news is that now there are tools that all businesses can afford to use to help analyze shipping spend. The bad news—many carriers and your competition are already using these tools.  

How can you start using analytics in your shipping negotiations?

1) Capture the data

If you haven't already integrated shipping software, or TMS software, into your ERP, WMS, inventory, CRM, and the like, that is your first step. You need one system that pulls all the data in and allows you to account for:

• Tracking information
• Freight charges
• Shipment details
• Carrier details
• Order numbers
• POs & reference numbers
• Product details
• And other essential data points across your supply chain

A robust TMS tracks data points in real-time and allows you to generate analytic reports gauging your internal and external activity.

What if you don't capture the data?

• You pay more for freight and shipping

• When you don't have an overview, you're flying blind and cannot compare costs, find carrier performance trends, or locate invoice discrepancies.

• You miss customer and operational trends

• Understanding your trends can help you ask for the right deals during carrier negotiations and make better decisions on the deals carriers offer. Remember, carriers already have data points on you. They may try and offer deals that do not save you much.

• You don’t know the actual cost of your shipping spend

• The sheer complexity involved— the various mode costs, peak season fluctuations, accessorial fees, NMFC misclassifications charges, and more— makes informed decisions impossible to make without an analytic overview. Businesses require a clear picture of spend to negotiate. 

2) Ask the right questions 

Know your operating costs and requirements thoroughly before you negotiate rates, especially if you are entering contracts.

You should ask questions such as:

• What type of freight class do we typically ship?
• What special handling requirements do we have (i.e., refrigeration, HAZMAT, etc.)?
• What types of truckloads do we typically use (i.e., LTL, FTL)?
• How much tonnage is shipped on average?
• What are our typical destinations?
• What are our standard payment terms?

Accessing your shipping trend data gives you leverage to use your shipping volume to your advantage, consider other modes, and know where you can save the most.  

When you have data on your typical spend, shipping trends, and the type of performance you are getting out of your carriers, you can start comparing options like never before. As we covered in our Freight & Shipper Optimization Guide, businesses often do not even entertain the possibility of switching modes, but after considering historical data, they find the option can save them considerably.  

3) Use predictive analytics

When using analytics to evaluate aspects of any business, the goal should be to evolve to the point where you can predict outcomes, rather than respond to situations as they come up. Prediction gives you better control and avoids unnecessary spend. 

In our Tracking & Reporting on Shipments guide, we looked at Gartner’s analytics maturity “journey”, which breaks analysis from reflection to prediction in four steps. 

1. Descriptive Analytics - A reflective view that compares goals and execution to results. 
2. Diagnostic Analytics - An analysis of how things evolved and why they did.
3. Predictive Analytics - An insightful step that takes historical data to extrapolate where new or different scenarios or actions may potentially lead.
4. Prescriptive Analytics - This is where many data points are analyzed and focused on what is most likely to happen. These identifiers give business foresight and intelligence.

In analyzing your shipping spend, you want to get to the point through the types of reports and benchmarks you set to predict the results you will have with a variety of shipping options.

As you head into negotiations, having analysis data focuses your attention on where it counts. You may discover:

• Carrier performance data indicates you should be selecting certain carriers for particular jobs. 
• Your shipping spend reveals you may not be using the right mix of distribution centers. 
• Last year's data shows you are paying much higher accessorial fees this year. 
• A historical rate comparison with competing carriers shows that last year you would have saved X. This data can be leveraged in contract negotiations.  

We have put together an incredible resource for businesses that ship. Our Parcel & Freight bundle features four eBooks that cover your entire shipping process, from orders to fulfillment. We provide tips on carrier rate shopping, how to digitize your supply chains, how to effectively audit, and more. Please check out the series below.