Top eight tips for ocean freight negotiations
Are higher shipping costs inevitable? TM Insight shares eight tips for negotiating the best possible rates.
In the past five years, a perfect and storm of mergers, closures and reduced services has resulted in lower capacity and increased rates in the ocean shipping sector. Although these changes have shifted power in favour of the shipping lines, higher costs are certainly not unavoidable, and competitive rates can still be negotiated for those with a little know-how. TM Insight specialises negotiating highly competitive rates throughout your supply chain. TM Insight’s Director – Supply Chain, Adam Noakes shares his top nine tips:
Maximise competitive tension
1. Timing is everything
Competitive tension between shipping providers is highest at the beginning of the calendar year, so it is best to negotiate your large volume contracts early in the year. Learn more about TM Insight’s Freight Optimisation capability.
2. Familiarise yourself with your shipping lines
Most trade lanes have multiple shipping providers. Make sure you know which shipping providers operate on your required trade lanes – the more providers, the greater your ability to trade them off against one another.
3. Take advantage of port pairs
Many regions have multiple ports, some of which are cheaper than others. By identifying cheaper ports, and being willing to switch shipping lines accordingly, your business can make significant cost savings. The experts at TM Insight can help seek out the most competitive port for your business.
Seek out the lowest rates
4. Negotiate split rates
For nine months of the year, most ships operate at only 40% capacity. If you’re able to ship outside the peak Christmas trading period, you may be rewarded with lower rates.
5. Get the right transit speed for you
As a rule of thumb, the faster the transit, the higher the rate. If you can manage your freight using slower transit speeds, you are likely the reap benefits in the form of cheaper rates.
Understand all the costs
6. Know the “tricks of the trade”
The shipping industry is notorious for its secret commissions and hidden charges, many of which are illegitimate and designed to catch out the novice trader. TM Insight has over twenty years of experience negotiating with shipping lines, and its expert Supply Chain team can help make sure you don’t pay any unnecessary or illegitimate costs.
7. Be sure to negotiate on “all in” rates
Shipping lines and freight forwarders will endeavour to introduce a shopping list of new charges once you have agreed on rates. Your negotiations should always be all-in rates. No exceptions!
8. Minimise your container costs after arrival
Shipping lines will charge you a demurrage fee for the use of the shipping container after arrival in port. These costs can sky rocket if you are so much as one day late. Make sure you read the fine print and minimise the use of your container after arrival in port.