There is little information available on policies and practices shippers rail transportation departments are using to control their cost of rail freight. As a result:
There is little direction for shippers to follow on changes that can be made within the transportation department to obtain better results from railroads.
The results of the survey taken at Escalation Consultants’s recent webinar, “Creating Opportunities to Reduce Rail Expenses” are therefore very informative as they provide:
Information on the current state of the art in shippers rail transportation departments and
Food for thought on changes that can be made in transportation departments to obtain better rates from railroads
One of the most interesting results was: 83% of shippers said that better access to historical results for their moves would improve negotiations with railroads. It is difficult to get people to agree on 83% of anything, so this indicates a real need for better access to historical rate and volume information.
A reason for shippers wanting better access to historical results is found in the response to the question:
“Do you feel railroads know more about your historical rates and carloads than you do?”
55% of shippers answered YES!
This indicates that railroads frequently know more about how shipper’s volumes and rates have changed than shippers do. This represents a big problem for shippers. Your railroad knows how your rates and volumes have changed. If past large rates increases are not addressed in current rate negotiations, this indicates one of two things:
You have forgotten about the large rate increases of the past; or,
Large rate increases are not causing you a problem.
Either situation can be detrimental to a shipper’s rates. Silence is Not Your Friend! It does not send the proper message to a railroad.
Another interesting result is that 55% of the shippers answered that they do not have access to historical data that summarizes all the historical changes in their movements. This means that it is difficult for these shippers to demonstrate the problems that past rate increases are having on their current business. This also provides some context for why 83% of the shippers answered that better access to historical rates and volumes would improve their negotiations with railroads. This is what the Rail Cost Control (RCC) program’s Database Management System provides to shippers!
The webinar provided examples of the impact that historical changes in rates and volumes can have on your rate negotiations with railroads. To gain access to a recording of the webinar contact EC.
Another interesting response: “Do you maintain historical bid rates for movements that did not win the award of carloads?”
Only 33% answered YES!
It can be very helpful to know how much a railroad missed the award by in the last bidding cycle. Railroads always say that their bid rates reflect the current market. It is good to be able to point out how their rates have been above market rates in the past. This provides shippers more credibility when discussing the rates needed for railroads to be successful in the current bid solicitation. This is especially relevant if you are going to be proactively establishing rates for your movements with railroads by providing:
– The Rates you need,
-The Reason why you need them,
-And the Reason the railroad should give them to you.
In Escalation Consultants’ experience, negotiations with railroads dramatically improve, when you establish an informed narrative.
This narrative refers to: the Rates you need, the Reason you need them, and the Reason the railroads should give them to you. Knowing how your rates have changed in the past, directly impacts the quality of your story. Leveraging this data dramatically improves your likelihood of obtaining better rates in the future.
The source of this data was the first in a series of three webinars that will address industry trends, strategic planning, and specifically designed tactics shippers can use to improve their rail negotiations and decrease rail expenses.
We hope you will join us again for Webinar #2 in May. This webinar will cover: Optimizing Your Spend on Each Railroad to Significantly Reduce Your Rail Expenses.
Escalation Consultants, Inc. developed Rail Cost Control (“RCC”) to help shippers reduce rail expenses by managing costs and empowering negotiations. Furthermore, for more information about RCC and other related articles, visit the RCC Blog.