Contract negotiations between shippers and carriers hang in a delicate balance, caught between priorities and expectations, with both parties striving to secure terms that will not only support their individual goals but also foster a long-term, mutually beneficial relationship.
Today, both parties are also grappling with sharp differences in pricing expectations. Carriers are aiming high, given rising spot rates, and shippers are pushing back to lock in lower contract rates amid ongoing market softness. And anxiety around potential disruptions and capacity management is turning the pressure up even higher.
To navigate the uncertainty, shippers and carriers are rethinking how they approach their contracts. The trends is toward shorter and more flexible contract terms that might allow for rate adjustments, review periods, or other levers that can be triggered by market changes — building in soft landings for both parties.
Given these conditions, both carriers and shippers need to come to the negotiation table in as strong a position as possible. Beyond the typical complexities of price negotiations, the real key to success lies in using data as a tool for true collaboration.
Shippers: Harnessing Data for Mutual Success
The first step is foundational: Shippers must capture the data they need to accurately measure their networks. Without a clear, data-based understanding, they can’t demonstrate their network’s performance at the negotiation table.
But while data does provide negotiating leverage for shippers, its real value lies in its ability to offer transparency and insight into the operational efficiency of both shippers and their carrier partners. Shippers that present themselves as “partners of choice” are those who are setting and tracking mutual performance goals, ensuring carriers have the information they need to meet these objectives.
The ability to monitor the movement of goods across their network, identify delays and measure efficiency via key performance indicators such as on-time delivery rates and transit times also proves beneficial during negotiations. Meanwhile, analyzing costs across routes and modes helps minimize expenses wherever possible. And historical data contributes to benchmarking against past performance in the pursuit of continuous improvement.
With accurate, real-time data, shippers can optimize their networks and demonstrate efficiency at every level, ensuring they’re not only running a tight operation, but also reducing costs in ways that directly benefit their carrier partners.
Clearly communicating these metrics helps shippers establish trust and makes it easier for carriers to align their performance to shipper expectations. Both parties can better achieve shared goals, such as higher service quality and reduced operational friction.
Carriers: Employing Leveraging Data as an Equalizer
Carriers, on the other hand, often shoulder significant responsibilities, from on-time deliveries to maintaining performance scorecards that reflect their efficiency. Carriers want to work with shippers that are transparent and fair, to ensure that they’re not burdened with unreasonable expectations or penalties due to external factors.
Data empowers carriers to defend their performance when issues arise that are beyond their control, such as delays at pickup or loading points. When shippers use data collaboratively, they can work with carriers to identify bottlenecks, troubleshoot inefficiencies, and implement changes that benefit both parties.
A true partnership isn’t about using data as a hammer to extract cost concessions or dictate performance; it’s about providing a lens to understand and solve mutual challenges. When carriers have reliable data, they can plan better, execute more efficiently, and feel confident that their efforts are valued by their shipper partners.
Collaborative Performance Metrics
For greatest effect, measuring network performance must be approached as a shared responsibility. Shippers should use their data not only to monitor their own networks but to establish fair, performance-based agreements with carriers. For instance, providing clear expectations and a grace period for new carriers to adjust to a shipper’s network is vital for avoiding unintended friction.
Carriers, in turn, can use performance data to ensure they meet agreed-upon benchmarks without facing surprise penalties. They can optimize their operations and better manage their resources, to ensure that assets are maximized and costs controlled.
At the heart of successful negotiations is the commitment to move beyond mere words. Shippers and carriers alike must embody the spirit of true partnership, so that their collaboration extends beyond the contract phase. Both parties must act as genuine partners in execution, using data to continuously improve, adapt and achieve shared success.
Ultimately, while data gives shippers leverage at the negotiation table, its greatest value is as a tool for collaboration. By using data transparently and fairly, both shippers and carriers can foster a relationship built on trust, accountability, and long-term efficiency. This spirit of partnership ensures that both sides win — not just in terms of cost savings, but also in building a more resilient and agile supply chain for the future.
Stephen Dyke is principal solution advisor at FourKites.