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Please find excellent examples or case studies of large-scale negotiations with transportation services (preferably with Amazon negotiating with carriers).
Hello, and thanks for your question about examples or case studies of large-scale negotiations with transportation services (preferably with Amazon negotiating with carriers). I have found 5 Case Studies that fit this criteria which I have provided details on. Below you will find a deep dive into my research, along with all the details as to how I came to this conclusion.
OVERVIEW
In order to answer your question I have searched for case studies of large-scale negotiations with transportation services, and have then outlined the challenges presented, the solution found, as well as the negotiation strategy.
To begin with, I found an article which details what should be expected and prepared for when negotiating a transportation/shipping contract. The article advises that you should be aware of the frequency that your company is shipping, current rates that you are currently paying, destinations and class of freight shipments, and the tonnage of your current shipments.
Below I have provided in depth details on 5 case studies. While I have searched for examples that include Amazon, there were none that I could find in case study format where details on negotiation challenges and outcomes were available. The ones listed below are all similar, and are focussed on large-scale negotiations with transportation services.
CASE STUDIES
This case study looks at how ICC managed to lower their logistical shipping costs through negotiation. They explain how they "negotiated Freight-All-Kinds rates with a carefully selected group of freight carriers", which enabled them to achieve significantly lower costs.
While this is not specifically a case study I though it was worth including as it details the value of using "The Cost Model Approach" style of negotiation. The article explains how most companies will pursue a "I'll have what he's having" approach, where they look at a deal that another company is getting and they ask for the same thing. However, it is more important to compare "the granular details of Company A’s shipping profile with the carriers’ costs to serve those packages" in order to gain better savings.
This case study shows an example of how pharmaceutical company AstraZeneca negotiated a better shipping deal with FedEx which saved them $21 Million. The solution they chose in order to do this is very similar to the "The Cost Model Approach", where the company benchmarked the shipping company's costs and compared to other companies as well as renegotiated the current contract.
The challenge presented by the client in this case study was the dilemma of whether they could consolidate their warehouses or not. The issue is that they had one warehouse that dealt with more time sensitive shipments than the other, and they were unsure of the financial impact of consolidation. The solution provided was that of building a new model of current distribution, which allowed alternative distribution strategies to be accurately compared. This model showed that although some costs would go up, overall they would be lower. The results showed that improved inventory management boosted order fill rate by 15%, and the client saved $2,200,000 saved yearly.
Finally, supply chain consulting firm Establish provides numerous examples of how in using their Request for Proposal (RFP) method they achieve successful transportation negotiations. They explain that their unique method where they "suggest to the service providers exactly what we are expecting in relation to the freight classifications, base rates, fuel surcharges and schedules, other assessorial charges, the percent discount, and other related expenses." They calculate that using this method they have achieved client cost reductions from 8 to 50%.
CONCLUSION
Overall I have found that companies are using a number of different negotiation tactics in order to achieve lower freight costs. For example, one method that is being used is the The Cost Model Approach" style of negotiation, whereas others are using a Request for Proposal (RFP) method.
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