Introduction

Our firm partnered with a leading chemical manufacturer to optimize their rail transportation costs and strengthen relationships with Class I railroads across North America. The client faced significant challenges with upcoming contract renewals worth over $90 million annually across four major carriers. Our expert’s deep expertise in rail operations, rate structures, and strategic negotiations enabled the development of a comprehensive plan to secure competitive rates while maintaining essential carrier relationships. The engagement focused on analyzing rate equations, mapping negotiation strategies, and creating a coordinated approach to leverage competition between carriers. Through careful planning and execution, our firm helped position the client to achieve substantial savings while improving their strategic position in the rail market.

At A Glance

The firm delivered a sophisticated rail contract negotiation strategy for a major chemical manufacturer, leveraging decades of Class I railroad experience and deep supply chain expertise. The project required careful analysis of complex rate structures, the development of carrier-specific negotiation approaches, and the creation of a timeline to coordinate multiple contract renewals.

Requirements

  • Analyze and optimize rate equations across four Class I railroads
  • Develop targeted negotiation strategies leveraging carrier competition
  • Create a comprehensive timeline to align contract renewals and maximize leverage

The Challenge

The client faced a critical juncture with $90.3 million in rail contracts requiring renewal across Class I railroads. The complexity was heightened by varying contract expiration dates, different rate structures between carriers, and significant volume at risk of being shifted between railroads. With approximately 32% of the total volume considered “jump ball” business that could move between carriers, the client needed a sophisticated approach to leverage this competition while maintaining positive relationships with all carriers.

The situation was further complicated by historic rate increases averaging 3-5% annually and carriers’ tendency to bundle services to maintain their competitive positions. The client required a strategy to reduce costs and preserve service levels across their network while navigating the complex dynamics between competing Class I railroads.

PraxiChain Solution

  • Developed comprehensive rate analysis comparing closed vs. open lanes across all carriers
  • Created carrier-specific negotiation roadmaps with defined triggers and decision points
  • Implemented a phased messaging strategy to influence carrier pricing decisions
  • Designed a “savings needed” approach focusing on high-cost lanes and competitive alternatives
  • Established a timeline to coordinate contract renewals and maximize negotiating leverage
  • Created a structured process to evaluate and compare carrier proposals across multiple rounds

Results

The consulting team’s strategic approach delivered significant benefits for the client’s rail transportation program. The coordinated negotiation strategy resulted in competitive tension between carriers while maintaining productive relationships. The project successfully aligned contract expiration dates across carriers, creating greater future negotiating leverage. The “savings needed” approach effectively identified opportunities to reduce rates on high-cost lanes through targeted competition.

The engagement established a repeatable process for future negotiations and created transparency in rate structures across the carrier base. Most importantly, the project positioned the client to achieve substantial savings while maintaining service levels and strengthening their strategic position with Class I railroads. The successful implementation demonstrated the firm’s ability to navigate complex transportation negotiations and deliver measurable value in rail procurement.