10 Fundamentals Beyond Price in Contract Negotiations

Michael J. Stolarczyk

Kontane Logistics
www.kontanelogistics.com

It’s that time of year again — time to negotiate carrier contracts! Too often, business leaders focus their attention on rate structures during carrier-contract negotiations while ignoring other important facets of the carrier process. Failure to address the entire scope of the carrier process can cause a business to fall short when trying to meet certain goals. Below are tips your business should employ to achieve success as it dives into its carrier-contract negotiations in 2010 and beyond.

1. Pickup performance.
How can your delivery be on time if your pickup isn't? Late pickups cost you more money, sometimes at overtime rates. Before agreeing to a carrier contract, you should know the carrier’s on-time pickup percentage and how the carrier calculates that measurement on a customer-specific basis. On-time delivery statistics are calculated in a similar way and should be readily available on customer reports — by customer and/or terminal.

2. Invoicing accuracy.
This important metric is often overlooked but can be the key to saving a company time and money. Carriers that invest in an imaging system that allows them to use information directly from a customer’s bill of lading can ensure accuracy while improving invoicing efficiency. If this isn’t one of the measurements you expect to receive from your carrier, it should be.

3. Claims structure and response time.
Getting a shipment to its destination on time doesn’t matter much if it doesn't get there in one piece. How quickly are the carrier’s claims settled? What is the percentage of claims-free service? What is the claims ratio of the terminal that will service your customers? Carriers should make these performance statistics available for individual customers and terminals.

4. Interactive Web presence.
Examining your carrier’s Web site can help you determine the availability of customer service when you need it. Is the Web site interactive in a number of ways to provide you with the information you need? The site should allow you to enter pickup requests and download imaged documents and customized reports. It also should offer a variety of tracking and tracing capabilities, rate quotes, transit times, and terminal information.

5. Good communication and collaboration.
Determining how much customers are involved in a carrier’s decision-making process indicates the level of interest a carrier has in delivering quality service. Initiating a good communications program and creating collaboration with customers is essential.

6. Responsiveness.
You should be able to talk with experts in each of your carrier’s departments when you need them. Is the carrier’s line of communication open and results-oriented? Maintaining a strong communication link goes hand-in-hand with developing a strong, effective partnership.

7. Centralized customer service.
A quick and readily available information resource is invaluable to you and your customers. This resource should provide you with an answer to any question you or your customers might have about transporting or tracing your shipments.

8. Empathy and proactive account management.
A carrier should know when and why a service failure occurred. If it delivers its shipments on time 98 percent of the time, a carrier should be able to tell you what went wrong with the other 2 percent. Carriers should follow up on every service failure, not only to find out what went wrong, but also to correct the problem so it doesn’t happen again. Taking this action will make the carrier a better company, and, in turn, provide you with better performance. Ask your carrier how it analyzes service defects.

9. Continuous improvement mentality and training.
The kind of training available to your carrier’s employees, how often they are trained and the degree to which they are trained should be part of the company’s strategy in providing superior service to its customers. Asking questions about a carrier’s training process will give you an indication of the company’s emphasis on quality performance. Does the carrier have an operations training program in place that emphasizes freight handling? Are its drivers trained? Does the carrier offer hazardous material training to its employees? What about general safety training measures? In addition to these training processes, a carrier should have accountability procedures in place at each facility to help reduce costs and waste.

10. Vested collaboration.
Does your carrier promote an open, sharing environment or is it merely a transactional organization? How much does it share with customers via popular social networks such as Twitter and Facebook, or through business-focused networks such as LinkedIn? Creating an atmosphere that has an “open-source” mentality will allow for new ideas to be shared freely and will present the carrier as an attractive corporate culture to experience.

If you take the time to think critically about these often-ignored aspects of the carrier process, your company will be equipped with the knowledge and trust it needs to achieve the best possible results for the year to come. Consistency, preparation and common sense should be your guiding principles when negotiating with your carrier partners. Revisit these tips in the years to come to ensure that all of your company’s requirements are covered. Good luck this year!

This is being featured on the JoC website... http://www.joc.com/node/416514.

Thanks to Marsha from the JoC and to LP for a great assist on the edit!