Did you know that around 40% of shippers tender or bid freight on a monthly or basis while 30% are negotiating freight rates quarterly or annually?
Negotiating freight rates quarterly, monthly and annually
This is the report in one of Xeneta’s studies. In their published article, it was stated that more and more carriers are now increasing short-term rates to their clients. This is in response to the major disruptions that have happened in the shipping industry.
What are the major factors considered by companies when negotiating freight rates
Given the fact that carriers are giving freight companies more freedom to choose, it is best to know what factors your freight forwarders consider when negotiating freight rates. This includes the following:
- Volume guarantees
- Number of destinations reached
- Years of contract-length
- Frequency of use
- Size of the company
All of these five factors play a significant role in the rate they provide you. Thus it is important to know how you can have a leverage with them when conducting a freight negotiation.
Things to consider when negotiating freight rates
Now that you can actually negotiate with your freight rates, here are some things you should remember:
Needs are different from wants
Do you only ship freight during certain seasons? How much capacity do you need?
Do you need an extensive customer service or do you just want barebones freight?
Negotiating freight rates: need vs. wants
It is always best to know the level of service, security and price you want. If you are unaware of these, discuss it with them so they can give you their options. Otherwise, you’ll be paying for a quote with services that are irrelevant to your needs.
Knowledge is power when negotiating freight rates
If you are are not in the habit of reading the news, then you better start now. You should know what’s happening around you, not only in the shipping industry, but also economics and politics.
Read the news before negotiating freight rates
You’ll soon realise that all of these play a special role on how your freight forwarder plays with their rates which includes answers to the following questions:
- Will they be increasing their rates?
- Are they likely to try to lock you into a yearly contract?
- Will they be trying to push more services on you than you need?
In time, you’ll know better what it is they’re going to offer before you even begin to talk with them. This will let you lead the conversation in the direction you want, and most importantly, to the price you want.
Price matters – but it is not the only thing that matters when negotiating freight rates
Freight cost matters, but you should look beyond the price. You should also consider the freight forwarder’s reliability, trustworthiness, and capacity during peak season.
Freight negotiating rate price not the only thing that matters.
Why? Because the last thing you would want to happen is to have hundreds of customers waiting for their products but with no clear freight solution. That would be a disaster and worst of all, it could mean the end for your business.
So guarantee that your freight forwarder of choice can deliver these products as you need them, even during critical conditions and peak season.
What to do before negotiating freight rates
For you to have leverage on the negotiating table, you should have answers to the following questions:
Review current market trends
Know the current market trends. See if political and economic issues on certain countries have affected transportation and currency rates. Did fuel rates increased or decreased? Moreover, look at how your freight forwarder is doing to better improve the services it delivers.
Identify your current volume and spend
Take a close look at your current volume and spend. Did you increase or decrease your freight demand over the last quarter? Were there any rate changes? Are you expecting an increased shipment per day? Do you need a standard service-level shipment?
If your freight has increased over time, then they can give you better rates to ensure you will not be looking for another freight forwarder.
Review your carrier issues
Over the course of your transactions these past quarter, did you experience any operational issues at your shipping facilities? How about incorrect billing that has resulted to disputes, credits or refunds? Are they delivering your goods in good condition, or do you see it getting lost, damaged or late?
If you are getting stressed because of inefficient services provided by your carrier, then it’s enough reason for you to consider other freight forwarders.
Service upgrade and improvements
You may be satisfied with what your freight provider is delivering to you. But look at other ways they can improve their services or you may want to take advantage of the service upgrades they are offering. You are most free to tell them this when you sit with them during freight negotiation.
We hope these tips are enough to give you leverage when negotiating freight rates. Follow our Facebook and LinkedIn profiles to remain posted with tips and guide about shipping, freight, importing and exporting.
