Assume the role of a firm trying to negotiate a lower transportation cost from y
ID: 344391 • Letter: A
Question
Assume the role of a firm trying to negotiate a lower transportation cost from your carrier for a new product. The carrier has proposed a transportation rate based on other products that they have shipped. You are convinced that these rates are too high.
A) What steps did you take (or should have you taken) over the past year with this carrier to prepare and help facilitate this discussion about rates?
B) Prepare a set of arguments designed to convince the carrier to give you a lower rate. In other words, identify the characteristics of your product and/or shipment that would make it easier and/or cheaper to transport when compared to the “average shipment” of similar products.
Explanation / Answer
(A)
The volume of parts transported vs. the rates could be a vital information needed to facilitate the discussion. In previous years, the transporter must have quoted the rates based on the volume of business received from our company. If the volume vs. rate data for previous 5~6 years are available, it will be easy to negotiate based on a forecasted volume transportation of new parts.
Furthermore, a similarity matrix with other parts must also be in place to initiate a comparison. The transporter must have quoted the rate based on an understanding of the product. But this understanding may be refuted by showing the similarity of this new product with some other old product for which the transportation rate had been low.
Moreover, it is also worthwhile to collect and summarize the Purchase Order (PO) details for last 5~6 years for this transporter which includes not only the PO from our department but across the company. Based on this information, the discussion can be streamlined and rates can be negotiated effectively.
Another important step which could have taken last year was to inform this transporter regarding the target cost of transportation for this product and a clear communication that failure to meet such cost may motivate us to search for some other transporter. This could have made the transporter ready for the discussion and negotiation.
(B)
The following could be some effective arguments -