If you haven't called your LTL carrier lately, now might be a good time.

Both buyers and market analysts tell Purchasing that now is an opportune time to renegotiate with less-than-truckload (LTL) carriers, as demand continues to trend down and competition and capacity both increase in the LTL sector.

But while some logistics buyers are focused on renegotiating lower base-rate increases with carriers this year, others are also using the soft market as leverage to negotiate with carriers on fuel surcharge schedules and caps, expecting a longer-term benefit if fuel prices continue up. In a recent note, Bears Stearns analysts said, "We have heard from both shippers and carriers that the carriers are having more difficulty passing through fuel costs as shippers are increasingly negotiating lower surcharge schedules or capping their existing fuel surcharges, lowering overall pricing in both short-term and long-term."

While carriers such as UPS Freight and FedEx Freight have issued rate increases of more than 5% this year (see sidebar), logistics buyers say nothing doing. "None of my primary carriers have issued rate increases, but some of the carriers I don't use all the time have," says Frank LaBletta, director of purchasing at Leone Glass in Bridgeton, N.J. "The carriers' timing is bad for rate increases as fuel surcharges have skyrocketed and total rates have gone up with some LTL carriers charging as much as a 28% fuel surcharge."

Ben Cubitt, vice president of supply chain at Rock-Tenn Co. in Norcross, Ga. says he put LTL out to bid in the third quarter of 2007 with good results, but says "conditions might be even better for buyers now." Because his company was fairly satisfied with its existing base rates, the bid was focused on moving carriers onto Rock-Tenn's fuel surcharge program, rather than their own.

"That was a big win and where most of the savings came from," Cubitt says, adding that it's a strategy that will increase savings if fuel prices escalate.

Rob Lewin, director of global logistics for Flowserve in Irving, Texas, says his company just finished up an RFQ for LTL that he said was "semi-scheduled" because the exact timing was driven by "seeing what the market would currently bear."

"We found there was a definite rate aggressiveness in the market and managed to drive a few percentage points off our current rates," Lewin says. "This willingness to reduce rates came from both the incumbents and new carriers."

One logistics buyer at a food products maker tells Purchasing that knowing the market was soft and that all of her carriers were making a profit on her business provided some negotiating leverage. "All of my carriers were asking for 4%+ increases. But after I negotiated one major LTL carrier down to only a 2% increase, the other carriers followed suit just to secure the business even though this was considered a less-than-market increase."

Most logistics buyers say that an open negotiating style works best in this environment. Leif Holm-Andersen, director of transportation at electronics distributor Arrow Electronics in Melville, N.Y. says his LTL rates today are at the same level they were in 2001, noting that even the most stingy major LTL carriers are coming in with offers to decrease or keep rates flat. "I did this by just laying it on the table and letting them know I knew it was a shipper's market so I expected a decrease," he says.

Gary Lozowski, a logistics commodity manager at Invensys in Foxboro, Mass., says he's seen more capacity opening up with the long-haul LTL carriers because of the housing slowdown, which provides leverage in that market specifically. "As a result I am seeing more of a willingness by the carriers to negotiate. For example, we just negotiated a one-year extension with one of our back-up carriers. There were no changes to the terms or conditions."