I've recently had a number of emails and inquiries from readers asking "when is it appropriate to consider a consultant in supply chain and logistics?". This has also been a recent question on LinkedIn Answers. The answers have varied based on circumstances and who asked the questions.
One area that I think definitely warrants consideration of outside help is in carrier contract negotiation. Experts with recent carrier experience who know a market inside and out can definitely pay for themselves. Rail contracting is a perfect example. Kathy Langan and Gordon Heisler of Professional Logistics Group in Oak Park Illinois give 10 tips below on negotiating with rail carriers in a strong market. (5 of which are shown here.) Professional Logistics Group has a heavy focus on rail transportation within their practice.
Use of a consultant could be helpful in gathering the background information needed for negotiations and in looking at your shipment profiles in terms of evaluating other modes of transport. If your shipping locations are on closed rail lanes, you are going to have to at least have the threat of modal competition to negotiate.
The railroads have the advantage of owning the way, and lets face it, there are no discount rail carriers on the horizon. In a strong market, where the railroads hold many of the cards, you may need help in building your business case.
How do you use consultants in your markets?
Eric
Negotiating Rail Contracts
By Deborah Catalano Ruriani
Negotiating with rail carriers has moved beyond difficult. Demand for rail services is high, and capacity constraints have caused carriers to pursue yield over volume. As a result, some shippers are experiencing sticker shock, with transportation rates increasing between 20 and 30 percent. If your rail freight moves on mostly "closed" lanes (no rail competition at origin or destination), you will be negotiating with a monopoly unless you can create the appearance of competition. Here is some advice from Kathy Langan and Gordon Heisler of transportation consulting firm Professional Logistics Group Inc., Oak Park, Ill.
1. Be prepared. Before you schedule carrier negotiations, gather all contract-related materials so you have everything at hand to start your analysis. Accumulate all contracts, tariffs, rate benchmarks, and information from carriers in all modes regarding their fuel surcharge programs and driver shortages. Also compile magazine and newspaper articles that discuss current rail events -- derailments, hazmat shipments, rate increases, new rail construction, and service impacts. When developing larger contracts -- $10 million and more -- begin preparation and strategy development six to nine months in advance of negotiation meetings.
2.Know your industry and how it impacts the carriers you negotiate with. Compile industry facts and statistics that demonstrate to rail carriers that your business is desirable. Show them how your industry is growing, for example, and what new technology is available. Describe how imports will affect domestic movements. Also determine what value railroads place on moving your commodities versus other commodities and traffic types.
3.Understand the rail carriers' key drivers. During the negotiations, try to draw out the carriers' motivations. What are their key drivers and pricing strategies? What are the railroads' marketing and operating goals, and how can your business fit in? Knowing current market conditions, and how they may influence the carriers' volume cycles, will impact their willingness to negotiate.
4.Leverage everything you have. Present your business as attractive for the carriers to handle, and emphasize your competitive lanes and growth opportunities. Prepare data on potential truck conversions, plant expansions, transloading opportunities, recent or pending acquisitions, and process improvements in your own rail management operations.
5.Consider operations, not just freight rates. Are you a "problem" shipper with excessive demurrage, poor fleet management, or difficult plant switching environments? Do your plants offer the opportunity for privatized switching? Is adequate car storage available? Meanwhile, understand how railroad network design, local operations, and capital improvements affect your traffic. Operational factors can be either distractions or opportunities for leverage in the negotiations; account for them in your strategy and approach.
view the rest of this list at inbound logistics magazine
|
Add Freightdawg.com to your social bookmarks!
Comments