With Container Shipping Prices Still Rising, How can you Negotiate the Best Rates?
Container shipping prices have increased this past year and there does not seem to be any sign that the prices will go down any time soon. With reports showing 25%-50% increases, supply chain managers need to understand how they can negotiate better prices. Simply stating that you want a better price is not a convincing strategy in the least.
If you want to negotiate a better price for your container shipping, here is how you should go about it…
Have your information fully documented and researched
Prior to negotiating a container shipping contract, it is important that you have all your information and documents well-researched and organized. This means that you should know your volume and budget needs and estimate any increases (or decreases) which may occur for monthly shipments.
Knowing your primary KPIs and your OTIF rates, you can better negotiate container shipping prices since you have a good understanding of what you need in return for the price you are paying… as well as what can be left out of the quote as it is useless for you specifically.
Know the price to ship
When negotiating the container shipping price, note that there is a cost to use the provider and there is the overall cost to ship. Unless specifically mentioned in the service level agreement (SLA), you may end up paying extra for things such as shipping insurance for DIM costs.
Comparing the costs to competitors and to market trends is essential. As shipping costs are volatile, understanding realistic increases and decreases in shipping costs will help you negotiate the best deal. Weight the level of professionalism with the rate offered by the provider. Negotiations should not solely focus on the lowest price for shipping a container, but the lowest price for the best service.
Is now the best time to negotiate?
It may seem that the time to negotiate is when the prices are high.
Ideally, a strong negotiation would allow you to have lower rates in a prime market. But there is a problem with this thinking. When rates are high, the shipping provider has the upper hand in the negotiations. Peak seasons are not the best times to negotiate shipping costs, as the price for shipping is always going to be higher as demand is soaring.
Instead, focus negotiations to occur in slow seasons. Businesses that cannot wait to negotiate their shipping contract should have an addendum in the contract, allowing for renegotiations. Set renegotiations in a non-peak season.
Know what you are paying for
The services provided in the contract should be clear. Negotiations of your SLA should clearly lay out the expectations between the two parties.
If you only require that the container moves from one place to another, you will not need to pay for any additional services. Though the services may be listed as standard, they are not free to the provider and so they are not free to you. You may negotiate down the price by eliminating services unnecessary to your needs.
However, be cautious when eliminating services in a shipping contract. While you may not need a particular service right now, you may later. Adding services back into a contract could end up costing you more in the long run so try to plan for the future as well as your immediate needs.
Leverage your logistic software
Double-check your shipping requirements by referencing your logistics software. Logistics software can help you to:
- Review rates in real-time for your lane
- Use your Transportation Management System (TMS) to review past shipments
- See the actual supply and demand
- Estimate future shipments
- Calculate profits and losses based upon shipping rates
Prescriptive analytics could play a critical role in the negotiations, as the software is decision-based. Finding the best option for your needs is what the AI is designed for, and so relying upon prescriptive analytics logistic software is advised.
Read the fine print
Read everything, every time. Contracts are written with wordage and clauses that can rack up additional costs. Look for any hidden fees which may be in the contract. Find out the fees associated with pickup and delivery delays, holidays, and CODs. Usually, it is in the fine print of the contract that negotiating can see the most change in the price.
Negotiate for the long term
While trying to get the best deal today may help your immediate needs, supply chains must look at the long-term relationship. Strong-armed negotiations have very little effect on pricing, as neither party feels that their financial needs are being met.
Try to find a middle ground, seeking providers who will work with you and offer you quotes for both one shipment and for group shipments. Get multiple quotes from multiple carriers so that you have some wiggle room to negotiate rates.
Providers who feel that they have something to gain by lowering their prices and establishing a long-term relationship with your business will be more apt to give you a competitive offer.