How Buying Power Impacts Freight Transportation Costs
Having trouble securing affordable capacity? Purchasing power could be the problem
In shipping, purchasing power — also called buying power — describes how far your business’ money can go when buying services from logistics companies. It’s impacted by everything from how much freight you ship to the modes of transportation you use, and it plays a big role in your ability to get the capacity you need at a cost that makes sense.
While occasional issues with capacity and pricing can occur due to tight market conditions, consistent challenges could indicate a need to improve your company’s purchasing power.
Why purchasing power matters in logistics
Think of buying power like a credit score: the better it is, the easier it is to manage your finances. And while you can certainly make it without a good score, it’s not always easy or cheap to get the things you need. When it comes to purchasing logistics services, lack of buying power can make it difficult to negotiate contract rates and make it harder to find the right capacity — both of which can increase overall transportation costs.
The good news is there are ways to improve buying power to see long-term benefits like better rates and more capacity options.
Tips for improving buying power
Because purchasing power is largely determined by how much freight you ship, making strategic changes to your operations can significantly improve it.
Focus on a smaller number of carriers
Using multiple carriers means freight is spread out and your buying power with each individual carrier is lessened. By working with fewer carriers, you have more freight to offer them, which may yield better rates.
Consider using fewer modes of transportation
Similar to the number of carriers you’re using, the number of modes you’re using can also impact buying power. For example, if you have inconsistent truckload shipments and occasional LTL shipments, it may be better to ship everything LTL. Increasing the number of shipments you offer a carrier can give you more leverage when you’re looking for capacity.
Start a relationship with an integrated logistics provider
Rather than negotiating rates with carriers on your own, partnering with a logistics company can give you access to a wide range of qualified carriers that have pre-negotiated rates. These rates are usually more competitive than a single shipper can get because the logistics company is able to use the freight volumes from all their customers to secure better pricing. This collective buying power is especially beneficial to small or infrequent shippers that may not be able to improve their own purchasing power enough to make a big difference to their bottom line.
Additionally, partnering with a logistics company can give you access to supply chain experts who can find other ways to reduce overall costs. Learn more about reducing your transportation spend.
Boost your buying power with ArcBest
Ready to see the benefits of partnering with a logistics provider? ArcBest’s broad capacity network and team of dedicated supply chain experts is ready to help you improve your buying power and negotiate better rates. Whether you’re looking to optimize your supply chain or simply want an easy way to check rates from multiple carriers, we have the solutions and expertise you need to secure affordable capacity and keep your freight moving. Learn about our full suite of supply chain solutions.