Freight Broker Tips: How to negotiate freight rates on your lanes 

Recent trends in truckload rates cast a cloud over the North American freight market. As rates fell, record fuel prices, inflation and geopolitical tensions have led to concern of a possible imminent freight recession.

Brokers can protect their margins by using forward-thinking strategies and comprehensive market rate data in turbulent times. Accurate market rates and trend forecasts are the centerpieces for strategic planning, but not all transportation rate data is created equal. The most useful and relevant dataset is that which has the broadest visibility of past, present and future rates.

Broad visibility, combined with timely and relevant market insights, helps brokers avoid making rash judgments based on incomplete or nearsighted data to navigate through uncertain times and to negotiate better rates with customers and carriers.

Understanding the differences between true market trends versus isolated events is paramount for brokers to maximize opportunities. Below are some best practices for using rate data and market trends to steer through a volatile market.

Maintain market awareness

Nothing stays the same in the dynamic freight market, except the factors that trigger changes in spot and contract rates. Some of the values for rates are unpredictable, but others can be determined with a high degree of accuracy from historical and seasonal trends.

The primary factors that determine changes in spot and contract rates are: 

  • The ratio of trucks and loads in the market for an origin and destination pairing
  • Pickup and delivery times
  • Peak season fluctuations
  • Weather events

All these factors add upward and downward pressure to national rates, but accounting for market-specific variables helps to further refine your pricing.

Lanes with higher load volumes will have more stable rates since more equipment is moving between the origins and destinations. This also makes capacity more reliable. Conversely, lanes with lower volumes are more sporadic in pricing due to uncertainty for equipment, drivers and market conditions.

One item to pay close attention to is what spot rates are being accepted by carriers in your targeted lanes and what rates are being rejected. Keeping a pulse on this activity will improve your negotiation strategy by ensuring you provide reasonable quotes for to shippers that will also improve the speed and efficiency of the booking process with carriers.

You can always lower your offer when brokering a load for a customer but increasing it will be very difficult.

Brokers can also gain a pricing advantage by leveraging historical data for specific markets. Recognizing rate patterns during a given month, time of the week or even time of day can help you predict when rates will rise or fall. Using historical rates alongside freight rate forecasts by transportation data experts will help your pricing to be more competitive and resilient.

Pay attention to details

Nobody wants to move freight at a loss, but sometimes going under to move a load for an important customer or prospect can lead to future opportunities.

The key is to understand your operating costs before entering new contracts. If a customer wants to extend an agreement you must ensure the profit margin is adequate before accepting. If your operating margin is already changing for the worse, you will need to evaluate the risk-reward opportunities for a lane and negotiate appropriate pricing.

Accepting a lower rate could mean future loads, but it’s also OK to just say no. “Losing” loads that are marginally profitable may ultimately save your business, especially if a pandemic, supply chain disruption or other black swan event occurs and drives up carrier rates, flipping a marginally profitable lane upside down.

Paying attention to detail also means accounting for accessorials such as fees, tolls and special permits required for a shipment. It also means considering equipment needs, appointment times and delivery locations that could drain profits.

Finally, customer service is a critical detail that successful freight brokers can’t ignore. Be sure to understand the unique needs of shipper and carrier partners to manage the details of each relationship. Operating a successful freight brokerage depends on it.

Use the right resources to negotiate

Do you have the right tools to negotiate freight rates? Transportation management systems (TMS) have all the essential tools to build, dispatch and invoice loads but lack visibility to market rates.

Load boards are far more useful for rate negotiations, especially those with best-in-class pricing tools, carrier monitoring and load tracking capabilities. Aside from load boards, brokers can use real-time market rate visibility and powerful analytics to gain an in-depth knowledge of trends at the lane level. 

Market data and rate analytics can be combined with your own historical data, such as carrier acceptance rates, to further refine your strategies to secure higher margins on booked loads. Likewise, rate forecasts can support strategic pricing moves to win long-term business.

All of these tools are available through DAT Freight & Analytics. By using the pricing tools you can negotiate faster, with confidence, to improve profitability by:

  • Instantly quoting prices for shippers. Rates are updated daily with options to see three-day, weekly, biweekly, monthly, and yearly averages, plus eight-day forecasts.
  • Comparing spot and contract rates. Get the most current insights on any lane with the timeliest data available. 
  • Protecting your margins. Calculate rates, surcharges and margins with all the latest information at your disposal.
  • Bidding on contracts. Win long-term business with accurate 52-week forecasts and with specialized RFP response tools in the add-on Ratecast feature.
  • Monitoring seasonal trends. Analyze rates on new lanes with comprehensive 13-month pricing histories.

RateView Analytics from DAT collects data from more than $125 billion in transactions annually, delivering market insights for more than 68,000 lanes and load-to-truck ratios in 145 key market areas. Brokers that use market insights can seize greater control over operating margins from using the most accurate insights into past, present, and future freight rates.

As the industry standard for truckload rates, DAT market data facilitates greater speed and transparency among shippers, brokers and carriers for rate negotiations. Check out this video to see how brokers use RateView to negotiate lane rates.

To learn how you can quote your customers quickly and protect your profitability, test drive RateView Analytics. Request a demo today to see how we help brokers control costs, improve speed and efficiency, and access the information that affects your business the most.

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