How businesses can save money with LTL contract management

How businesses can save money with LTL contract management

LTL (less-than-truckload) shipping allows multiple shippers to share space and costs for smaller freight loads that don’t require a full truck. However, rising LTL shipping costs are a persistent challenge for manufacturers, distributors, retailers and e-commerce businesses. Broussard Logistics explains how strategic contract management can reduce LTL shipping costs.

While many companies focus on negotiating lower rates, true savings come from a strategic, ongoing approach to LTL contract management. By treating contract management as a continuous process, you can unlock significant, long-term savings and bring predictability to your supply chain.

What Is Strategic LTL Contract Management?

Strategic LTL contract management goes beyond simply shopping for the lowest rate. It’s a cyclical, data-driven process that includes analysis, negotiation, monitoring and continuous optimization. The goal is to create a partnership with your carriers that balances cost savings with reliable service so your shipping contracts are always working in your favor.

Key elements of strategic LTL contract management include:

• Data analysis: Regularly review your shipping data to understand true costs, shipping patterns and areas for improvement.
• Informed negotiation: Use data insights to negotiate contract terms that reflect your actual shipping needs and leverage your volume for better rates and terms.
• Performance monitoring: Track key performance indicators (KPIs) like on-time delivery, damage rates and invoicing accuracy to ensure carriers meet agreed standards.
• Continuous optimization: Adjust contract terms and carrier relationships as your business changes so your agreements remain competitive and cost-effective.
• Collaborative partnerships: Open communication and long-term relationships with carriers encourage flexibility, proactive problem-solving and mutual success.

The Foundation of a Strong Contract: Data and Forecasting

To better understand how to save money with LTL contract management, start at ground level. Before entering negotiations, consider your shipping profile and anticipate future needs. Gathering the right data and using forecasting tools will enable you to negotiate optimally and avoid unexpected costs down the road.

Analyzing Your Current Shipping Profile

Before you can optimize your LTL contracts, thoroughly analyze your current shipping profile to understand where your costs are coming from and identify opportunities for improvement:

• Conduct a comprehensive freight audit to uncover your true shipping costs
• Identify your most common shipping lanes and freight classes to target high-impact areas
• Pinpoint frequent accessorial charges like liftgate or inside delivery fees that can be negotiated or eliminated
• Use historical data to spot trends and inefficiencies in your current shipping operations

Projecting Future Shipping Requirements

Ensure your LTL shipping contracts remain effective as your business develops by projecting your future shipping requirements and anticipating changes in demand, volume and service needs:

• Factor in business growth, seasonality and market changes to anticipate future shipping needs
• Use forecasting tools to estimate future volumes and budget accordingly
• Prepare for new product launches, geographic expansion or changes in customer demand that could impact shipping patterns
• Build flexibility into your contracts to accommodate anticipated changes

Key Elements of a Cost-Saving LTL Contract

Effective negotiation is about more than the base rate. The most impactful LTL shipping contracts deal with a range of terms that can significantly affect your bottom line. Understanding and negotiating these elements is key to maximizing your savings:

• Pricing and discounts: Compare different pricing models to find the best fit. Negotiate meaningful discounts based on your volume, consistency and shipping profile. Ensure discounts are clearly defined and not subject to hidden conditions.
• Fuel surcharges: Understand how fuel surcharges are calculated and how they impact your total cost. Negotiate for a more favorable surcharge formula or cap to reduce volatility.
• Accessorial fees: Identify common accessorial charges like residential delivery, liftgate or reclassification. Work to standardize or reduce these fees in your contract.
• Liability and insurance: Review and negotiate liability limits to avoid unexpected costs from damages or lost shipments. Ensure insurance requirements are clear and cost-effective.

Building Strong Carrier Partnerships

A well-negotiated contract is only as effective as the relationship that supports it. Businesses ultimately save money with LTL contract management because it establishes collaborative partnerships with carriers that lead to better service, more flexibility and a greater willingness to resolve issues in your favor.

Clear Communication and Operational Efficiency

Building strong carrier partnerships starts with clear, consistent communication and operational efficiency. When your logistics partner provides carriers with accurate shipment information, ensures timely pickups and maintains efficient dock operations, it positions your business as a preferred customer or “shipper of choice.” This can lead to faster service, fewer delays and greater flexibility from carriers.

Operational excellence not only streamlines your supply chain but also gives you leverage to negotiate better rates and service terms, ultimately driving down your shipping costs.

Long-Term Commitments

Committing to longer contract terms or providing consistent shipping volumes can be a powerful tool in negotiations. Carriers value stability and predictability and are often willing to offer more favorable pricing and service guarantees in return. By building trust and reliability with your carriers through long-term commitments, your business is better positioned to secure capacity and maintain stable rates, even in periods of high demand or market volatility.

Dispute Resolution and Flexibility

A collaborative carrier relationship is essential for resolving issues quickly and fairly. Instead of defaulting to extra fees or drawn-out disputes, a strong partnership encourages open dialogue and problem-solving. This helps avoid unnecessary costs and ensures the smooth management of your supply chain.

Encouraging carriers to proactively communicate potential problems or opportunities for improvement further strengthens the relationship. When carriers feel comfortable sharing insights or flagging issues early, your business can address concerns before they escalate, adapt to changes efficiently, and continuously improve shipping performance.

Ongoing Contract Management and Optimization

Signing the contract is just the beginning. Real savings and supply chain resilience come from actively managing your LTL agreements and carrier relationships over time. Ongoing contract management ensures you continue to get the best value as your business and the market evolve.

The following are strategies for optimizing contract management:

• Leverage transportation management software (TMS): Monitor KPIs like on-time delivery, damage rates and invoicing accuracy. Use data to identify trends, address issues and hold carriers accountable.
• Plan regular business reviews: Schedule quarterly or semiannual reviews with your carriers to discuss performance, address concerns and explore new opportunities. Use these meetings to renegotiate terms as your business needs change.
• Be flexible: Remain proactive in communicating changes in your shipping profile or business strategy. Work with carriers to adjust contract terms midcycle if necessary, ensuring continued alignment and value.

This story was produced by Broussard Logistics and reviewed and distributed by Stacker.