Maximize Your Rail Rate Negotiation Leverage

 

As a follow up to the Rail Rate Guide that we published last month, here are some additional tips for maximizing your negotiating leverage with rail carriers.

  • Take the time to be strategic. Working in logistics can feel like a plate spinning skit. It’s fast paced work, you have to juggle multiple priorities, and there can be a constant stream of new issues to deal with. The sales department may be breathing down your neck for a new rate they needed yesterday. In this environment it’s hard to have the time to thoroughly analyze lanes and rates and take a long term view. The rate request tools in RSInet and cost analysis in USRail organize this process and enable quick rate estimates.
  • Compare captive and competitive treatment. When captive railroads handle a portion of your competitive traffic, they may save you a dollar on the competitive lane, but take back three on the captive one. Again, you have to look at the big picture and be strategic. Look for our article on bundling rates that will be posted in a few weeks.
  • Utilize Rule 11. With a through-rate, you are leaving the task of representing your interests up to the origin carrier. Negotiating with each railroad in a lane using Rule 11 can provide lower rates and better service.
  • Control all of your freight. Some shippers let their suppliers or customers control their shipments. This can be a mistake in two ways. First, suppliers focus on providing products—not negotiating the best shipping rates; the higher costs are passed on to you. Second, the traffic presented to the railroads for those lanes can provide additional leverage in your negotiations. Similarly, some companies have their marketing, plants, or subsidiaries to negotiate their rail contracts independently. They are missing the analytical, strategic, and relational advantages that a centralized approach provides.
  • Prepare a good business case. “You always give me something I can take to management” is a compliment that I heard a railroad representative give to someone in our office. That’s exactly what you want to hear. You have to be able to explain why what you are asking for will benefit both parties.

We hope these additional tips are helpful. Give us a shout if it’s a challenge to find the time to proactively manage your rail rates or, if you suspect that leveraging our expertise would be helpful.