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How can you manage transportation contracts to save money and time?

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Transportation contracts are agreements between shippers and carriers that specify the terms and conditions of transporting goods. They can have a significant impact on the cost, efficiency, and quality of your logistics operations. However, managing transportation contracts can be challenging, especially if you have multiple modes, destinations, and service levels to consider. In this article, you will learn some tips and best practices on how to manage transportation contracts to save money and time.

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Anda Urzica

Overseas Sales Director at ASG WIND Transport
Rafa Rocha

SVP Commercial at Emergent Cold Latam

1 Negotiate rates and services

One of the most important aspects of managing transportation contracts is to negotiate the rates and services that suit your needs and budget. You should compare the offers from different carriers, taking into account the mode, distance, volume, frequency, transit time, and reliability of each option. You should also consider the value-added services, such as tracking, insurance, customs clearance, and reverse logistics, that each carrier can provide. Negotiating rates and services can help you reduce your transportation costs and improve your customer satisfaction.

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Rafa Rocha

SVP Commercial at Emergent Cold Latam
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Other topics that are important when negotiating transportation contracts: - Fuel Price Adjustment: It's fair and every time more common that trucking companies have a different line to adjust fuel prices. This way is clearer to everyone that is not an adjustment in margin but rather a pass-through of costs. - Handling Services who will load and unload the truck - Insurance Costs: Sometimes we handle valuable goods, and some carriers do not offer insurance. This will impact the costs considerably. - Reefer Costs: it's common for companies to load the truck and then plug it ahead of time, so the truck is ready to be dispatched. Nevertheless these costs can be enormous, especially if the reefer depends on the truck engine, consuming fuel.

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Amitesh Bharti

Category Lead at OfBusiness
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Please find the below point that can help in reduce the transportation costs- *Compare Prices -Before meeting with your carrier, find out what their competition is charging. *Don't Pay for What You Don't Use -Discuss with your carrier the types of services they provide and pick what's relevant to you. *Build Relationships -Your carrier is a crucial component of your supply chain. When negotiating freight rates, use your people skills to build positive long-term relationships. *Leverage Group Buying -For most small and medium-sized businesses,By joining a buying group, you can leverage the collective buying power of the group to score discount shipping.

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2 Monitor performance and compliance

Another key aspect of managing transportation contracts is to monitor the performance and compliance of your carriers. You should establish clear and measurable key performance indicators (KPIs), such as on-time delivery, damage rate, service quality, and customer feedback, to evaluate how well your carriers are meeting your expectations and contract terms. You should also track and verify the invoices, bills of lading, and other documents that your carriers send you, to ensure that they are accurate and consistent with the contract. Monitoring performance and compliance can help you identify and resolve any issues or disputes that may arise with your carriers.

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Rafa Rocha

SVP Commercial at Emergent Cold Latam
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Setting the expected level of services by using the right KPIs will help you to control the vendor. Besides, paperwork when handling drayage is a huge part of the job. Not every trucking company has enough experience with some ports and this can generate hidden costs like demurrage, reefer plug in, port costs, and others. A well-documented procedure on how to handle the import and export with the vendor will reduce the changes of problems.

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3 Review and renew contracts

A third important aspect of managing transportation contracts is to review and renew them periodically. You should analyze the data and feedback that you collect from your carriers and your customers, to assess the effectiveness and efficiency of your transportation contracts. You should also keep an eye on the market trends and changes, such as fuel prices, demand fluctuations, regulatory updates, and technological innovations, that may affect your transportation needs and costs. Reviewing and renewing contracts can help you adjust and optimize your transportation contracts to suit your current and future goals and challenges.

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4 Leverage technology and tools

A fourth useful aspect of managing transportation contracts is to leverage technology and tools that can simplify and streamline your processes. You should use software and systems that can help you store, access, and update your transportation contracts in a centralized and secure platform. You should also use tools that can help you automate and integrate your transportation contract management with your other logistics functions, such as inventory management, order fulfillment, and distribution planning. Leveraging technology and tools can help you save time and resources, and enhance your visibility and control over your transportation contracts.

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Anda Urzica

Overseas Sales Director at ASG WIND Transport
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In the century of technological advancements that have transformed the way businesses operate, it's crucial to understand that your clients require top-notch tools that enable them to effortlessly track data and access information. By ensuring efficient traceability and monitoring, you can enhance your customers' overall experience.

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5 Collaborate and communicate

A fifth essential aspect of managing transportation contracts is to collaborate and communicate with your carriers and other stakeholders. You should establish and maintain a good relationship with your carriers, based on trust, transparency, and mutual benefit. You should also communicate regularly and effectively with your carriers, to share information, expectations, feedback, and solutions. Moreover, you should involve and inform your internal teams, such as sales, finance, and customer service, about your transportation contract management, to ensure alignment and coordination. Collaborating and communicating can help you improve your teamwork and problem-solving, and increase your customer loyalty and retention.

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Rafa Rocha

SVP Commercial at Emergent Cold Latam
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Agree, collaboration is essential when working with carriers. A well-designed and established procedure, along with training will reduce the chances of mistakes and hidden costs.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you manage transportation contracts to save money and time?

1

2

3

4

5

6

1 Negotiate rates and services

2 Monitor performance and compliance

3 Review and renew contracts

4 Leverage technology and tools

5 Collaborate and communicate

6 Here’s what else to consider

Logistics Management

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How can you manage transportation contracts to save money and time?

1

2

3

4

5

6

1 Negotiate rates and services

2 Monitor performance and compliance

3 Review and renew contracts

4 Leverage technology and tools

5 Collaborate and communicate

6 Here’s what else to consider

Logistics Management

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