Carriers should not treat rate negotiations as a binary choice between accepting a reduction and abandoning the freight; they should first evaluate cost inflation, lane economics, network fit, and the shipper relationship together.
The balance of power had shifted back toward shippers after the pandemic rate surge. Unlike earlier cycles, however, carrier costs had increased along with rates. Driver pay, equipment price and availability, maintenance, insurance, and other expenses had changed materially.
Since the pandemic began, KSMTA's average client's variable costs excluding fuel had risen approximately 30%, and those costs were not expected to decline soon. Carriers therefore had much less to give back.
KSMTA recommends a third option for difficult price conversations: a model that combines the carrier's cost environment, the customer's freight economics, and the customer's desirability as a business partner.
Carrier Costs
Create a pre- and post-pandemic comparison of costs by category and calculate the increase in each. Many of those increases came from circumstances outside the carrier's control and may be permanent.
Benchmark the categories with a third-party source such as the TCA Profitability Program. The result should be an attractive one-page exhibit that can be shared with the customer.
For transparency, include the general-ledger accounts mapped to each category. The document should demonstrate that the carrier understands its costs and manages them responsibly.
Lanes, Pricing, and Gross Margin for Each Customer
Map the lanes hauled for the customer on top of the carrier's wider freight network. Different colors can distinguish customer freight from other lanes, while arrow direction and line width can show movement and volume.
If the customer's lanes fit the carrier's geographic footprint, that is a positive signal. If not, consider whether brokerage can preserve margin using another carrier's assets.
Create a lane-level table for the customer's freight. Start with load count if more advanced measures are not yet available. Use linehaul plus fuel surcharge for rate comparisons, then calculate gross margin per mile and gross margin per day for each lane.
Create a Shipper of Choice Model
The carrier should also evaluate the customer's behavior and operating demands:
- Is the shipper trustworthy in both strong and weak freight markets?
- Does it respect timelines?
- What trailer pools, appointments, loading times, and unloading times are required?
- Does it treat executives, back-office employees, drivers, and consignees with respect?
- Is the RFP process fair?
- Are reporting and response expectations reasonable?
The information can be weighted into a shipper score or reviewed qualitatively as part of the decision.
The process is time-consuming, but it creates a holistic view of the customer. The shipper decides which carrier receives the tender; the carrier decides whether the rate is sufficient to haul it. That relationship remains a two-way street.