As a shipper, your primary objective is to secure favorable freight rates and terms. A key strategy to achieve this is through a well-structured freight negotiation process.
To assist you in reducing costs, we have compiled some top preparation tips in this article to guide you in negotiating international shipping rates with freight forwarders.
Enhance your logistics game today!
Understanding international freight rates
International freight rates, as the name suggests, are the charges applied by a freight forwarder to a shipper or consignee of a cargo. These costs vary depending on the mode of transportation, package type, cargo weight, and distance traveled.
8 tips for efficient freight negotiation
1. Understanding your operational costs
Consider the various side costs associated with merchant haulage, such as demurrage or detention fees, warehousing free time, local charges, landed cost, the location of both pick-up and return of empty containers, etc.
These charges can accumulate and potentially exceed any savings from lower freight rates.
Start by understanding your current spending on freight and associated costs. It will help you identify areas where you can reduce expenses while maintaining service quality.
2. Deep into current industry freight standards
Monitor industry trends
Factors like seasonality and supply and demand can lead to price fluctuations. Monitoring industry innovations, market benchmarks, and competitor rates is essential.
Conducting competitor analysis and following sector-specific publications that provide real-time market insights can help you stay informed.
Obtaining market rates
Securing fair and competitive pricing and gaining leverage in freight negotiations depend on understanding market rates. Subscribing to industry newsletters and publications like Supply Chain Div, Gartner for Supply Chain, and Supply Chain Digest can provide regular updates on market rates and benchmarks.
Explore external influences
Fuel prices, demand fluctuations, and global economic conditions can also affect freight rates. Extreme weather events can disrupt the supply chain, increasing transportation demand.
Seasonal events like Christmas Day or Chinese New Year can increase rate hikes as suppliers rush to move stock before the holidays. Additionally, geopolitical tensions, such as the Russia-Ukraine conflict, can impact fuel prices and freight costs.
3. Identify your freight requirements
To ensure fruitful discussions with your carrier or freight forwarder, it’s essential to identify your specific freight needs. Utilizing business data can help determine the most suitable modes, routes, and delivery times based on your requirements.
By grasping the precise details of your freight needs, you can effectively communicate them to carriers and negotiate terms that align with your requirements.
4. Consider shipment consolidation
Shipment consolidation is a valuable strategy for reducing international shipping costs. Access to less-than-container (LCL) options to merge several small loads into a single, larger shipment.
By consolidating your shipments, you can reduce the number of carriers required and negotiate rates more efficiently.
5. Consult with multiple carriers
It’s wise to deal with multiple carriers when negotiating freight rates rather than limiting yourself to just one. Request quotes from several freight carriers to gain leverage in negotiations and easily compare rates.
6. Compare spot and contract rate
Spot rates are the current market rates for specific shipping lanes. They can be advantageous when market conditions are favorable, offering potentially lower costs than contract rates. However, spot rates are subject to market volatility and can fluctuate widely.
On the other hand, contract rates are negotiated and agreed upon in advance, providing stability and predictability in pricing over a set period. While they may initially appear higher than spot rates, they can offer significant cost savings in the long run, especially when shipping volumes are consistent.
7. Don’t overlook hidden fees
Ensure a thorough review of the entire agreement, including the fine print. Pay close attention to any buried exclusions, limitations, or hidden fees in the freight contract. These factors can significantly impact your overall operating costs.
8. Cultivate strong partnerships
Mutual respect and effective communication are fundamental to successful business partnerships. Avoid treating your relationship with a carrier or freight forwarder as purely transactional.
By fostering trust and open communication with your carrier, you can collaborate to find optimal shipping solutions that benefit both parties. It is particularly crucial for regular or high-volume shipments.
Conclusion
Negotiating the best freight rates is pivotal for any successful business, offering substantial savings in shipping expenses.
With these tips in mind, you can achieve more favorable terms for freight services, ultimately lowering your operating costs.
Airsupply provides a transparent pricing structure, eliminating hidden costs and simplifying international shipping processes. Let us assist you in reducing operating expenses by optimizing your supply chain logistics.
