Tight capacity is driving shippers and carriers to take a hard look at the value of freight contracts. Shippers are seeking rate stability, good service and capacity commitments. Carriers are looking at securing the most attractive yields on their assets and consistent volumes on lanes that fit with their core competence. One method of helping both parties achieve their goals is by capturing the key elements of the business relationship in a well crafted contract. To create truly Win-Win freight agreements, there are a number of core principles that need to guide these discussions.
Pricing is one Key Element of the Total Package
Shippers are looking for competitive rates. Carriers are looking at offering rates that are competitive, so long as they produce a satisfactory return. Competitive rates are a starting point, a way of filtering and ranking potential carriers in terms of cost savings or cost containment.
One of the critical guiding principles in the carrier selection process should be to evaluate potential business partners across a broad set of variables. These requirements should include size and type of fleet, safety rating, energy efficiency, service performance, and EDI capabilities. A good contract should spell out the shipper/carrier expectations and requirements for each of these items. Rates are very important and will ultimately be a determining factor but they should be partof the total package.
The contract should spell out the length of the award and the level of rate increases in future years. All rates, accessorial charges and fuel surcharges should be spelled out in the appendices....