Who’s actually in control of your rail costs? If you believe the railroads are in control, you are not alone and while it defies logic, this is a common complaint among rail shippers who face the  take-it-or-leave-it attitude of the carriers.
 

Common sense tells us that the person who should be most qualified to lead and direct negotiations is you, the shipper. After all, you know your business and the markets you serve better than any outsider, especially considering the recent high degree of reorganization and turnover of railroad sales and marketing personnel.
 

While there are a few exceptions, it’s no secret that the railroad industry is experiencing a knowledge gap. As an example, on 100% of our benchmarking projects over a six year-period, we found clients have paid railroad overcharges ranging from $236,000 to $2.6 million in a single year, due to railroads charging contract rates higher than public tariff rates. Based on conversations with several railroad marketers, we believe these were not intentional. Instead, the errors are simply a symptom of a general lack of knowledge and proper training.

At Highroad, we help our clients to wrest control of their rail costs. The objective is to design strategies so you can work collaboratively with your rail carriers and earn their respect while presenting your company’s needs based on fact-based strategies.

Some shippers make the mistake of simply targeting a set increase level, and if they achieve, for example, the 4% or 10% targeted, they consider it a win. However, by accepting general increases, some rates will not be market competitive, and you can risk losing some customers within your traffic mix. 

So, how do you start?  How do you gain control? By playing smarter and knowing your competition. At Highroad, we have developed an analytical model, VIEWPOINT™ to identify and analyze rates paid by your direct competitors to access specific customers and markets. When contracting a benchmarking study, avoid those firms that simply perform regression analyses of records of shipments in your company’s lanes, with the objective to establish your targets based on average rates. Afterall, who wants to be average? While some rates may be higher, rates paid by some shippers in those same lanes are below average. You want to know what your competitors are paying.
 

It's likely you will confirm your company already has a good competitive position in some lanes, while at the same time, you will develop the evidence needed to sell your carriers when rates require adjustment in other lanes. Also, during the course of the analysis, leverage points are identified so you will approach negotiations from a position of power.

Finally, the goals of your negotiating strategy should only focus on those rates that require adjustment, while mitigating rate increases in other lanes to the full extent possible. You will earn carrier respect, and your requests will be viewed as credible if you focus on your real needs. Adopting this fact-based approach, versus asking for rate reductions in each and every lane, ensures your probability of success.

Knowing your needs in advance of negotiations is essential to gaining control, so you can keep your total landed rail costs in check, and the cost benefit of a fact-based strategy always exceeds the cost of a professional benchmarking analysis.

Call (219) 838-3800 by June 13th, 2025, for a FREE one (1) hour consultation.

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