According to the latest news, shippers aren’t signing annual freight contracts in a hurry. Moreover, shipping costs are rising due to disruptions in the Panama Canal and Suez Canal. The cargo diversion around the Cape of Good Hope has increased the shipping rates. Container rate negotiations in the Transpacific region will see a major impact. These disrupted shipping routes will influence contract negotiations. Particularly, the ocean freight contracts.
Due to delays in ocean freight, some companies are shifting to air cargo alternatives. It is causing a ripple effect with a rise in shipping costs. Further, increases in global fuel costs and labor shortages are affecting shipping contracts. So, businesses have to adopt new strategies to negotiate shipping contracts.
Businesses are increasingly finding it difficult to negotiate deals that suit all parties. So, shipping contract negotiations will be tricky in 2024. For successful negotiations, planning, interpersonal skills, and know-how are essential. Our earlier blogs were on negotiating carrier contracts.
In this article, here are our suggestions on the five best practices for negotiating shipping contracts for 2024.
Importance of negotiating shipping contracts
Shippers have to consider financial challenges to secure favorable shipping contracts. Any shipping contract, either freight or small parcel, involves many variables. These could include fuel costs, inflation, reduced capacity, and more. So, companies require experts and analytical software when reviewing shipping contracts. Further, negotiations between shippers and carriers are essential to offset rising shipping costs.
Five best practices for negotiating shipping contracts
- Prior preparation for the negotiation process
Before negotiating with shipping carriers, some guidelines are necessary. Initially, the negotiating team has to set objectives, plan the meetings, and appoint a team leader.
Further, negotiators should have in-depth knowledge of the shipping industry. Other factors that are a part of the negotiation process include:
- Understanding shipping needs
A shipping profile includes service levels, shipping volumes, delivery pickup, and destination. In addition, it comprises the weight of packages (both actual and dimensional), surcharges, carrier pricing structures, etc. It is vital to know about shipping needs before entering into a shipping contract.
- Data review
Shipping data is the bargaining tool for getting favorable shipping contracts. Historical shipping data gives shippers tips on shipping patterns. Shipping invoices and real-time delivery data provide insight into carriers’ performance. Further, data on pricing of package weights, and surcharges needs reviewing. Moreover, comparing data points from other companies helps in negotiations.
- Analyze shipping contracts
It is necessary to examine current carrier contracts to identify shipping costs per package. When negotiating new contracts, evaluation of cost calculations, and transit time is required. Moreover, it is essential for the examination of shipping carrier performance at service levels, and careful inspection of carrier proposals.
Audintel’s Carrier Pricing Data Analytics services help shippers understand the intricacies of the negotiation process. Our cloud-based platform allows companies to have shipping data at their fingertips.
- Shipping contract strategies
After understanding the shipping needs, planning of contract negotiation techniques is next. It involves examining shipping rates, delivery speed, transparency in tracking shipments, and more. Negotiators have to avoid surcharges and excess carrier fees. The shipping strategy should include affordable shipping costs and decisions on optimal delivery routes.
Companies have to be careful about their shipping strategies. It should not adversely affect order fulfillment and customer satisfaction. Further, understanding the rates or fees affects a company’s bottom line. Shippers can’t overlook the transportation spend.
Audintel’s Transportation Spend Management (TSM) solutions provide strategies to negotiate shipping contracts. We help in navigating complex carrier pricing rules and agreements.
- Negotiating shipping rates
Many shipping carriers have different shipping rates. Knowing which shipping carrier has lower shipping rates can save money. For example, UPS Ground shipping rates are lower than FedEx shipping rates. It is true for US domestic packages depending on their weights and shipping zones. Further, shippers have to consider the annual General Rate Increase (GRI) of shipping carriers. GRIs can impact a company’s shipping budget.
Negotiating for lower shipping rates and discounts helps shippers save money. In addition, negotiating surcharges can save money for businesses. Fees associated with residential delivery, address correction, and weekend delivery are rising yearly. For example, shipping carriers may charge extra fees for overnight delivery.
An in-depth study of carrier shipping rates helps to negotiate surcharges effectively. For instance, companies may send many packages to residential areas. They need to focus their negotiation on the particular surcharge. Further, handling fees of packages can increase the shipping costs. Shipping carriers can include insurance as a part of shipping rates. Shippers can negotiate for discounts on surcharges and save money.
AI-enabled software tools of Audintel give insights into shipping rates. We advise shippers on the surcharges offered by different shipping carriers. It helps businesses make informed decisions.
- Need for flexible agreements
Shipping rates and surcharges of shipping carriers change every year. Shipping contracts are long and need to be fine-tuned. Carriers are adept at making changes in agreements. Shippers need to have clarity about the contract terms and services offered. Companies can renegotiate shipping contracts with their proposals. In addition, by working with multiple carriers, shippers can get a favorable shipping contract.
Companies have to keep alternatives to proposals ready and save money. Shippers can set a benchmark figure as a starting point. For example, when discussing delivery time, look for a good deal. If it is not possible, opt for another shipping carrier for a better deal. Negotiating with multiple shipping carriers can reduce shipping costs.
Audintel helps companies negotiate deeper discounts from shipping carriers. We advise shippers on the choice of shipping carriers for their business needs. Our team also aids shippers to help them understand complex carrier pricing agreements.
- Foster strong relationships with shipping carriers.
Successful negotiations are not limited to the terms of the shipping contract. It is equally important to develop a rapport with the shipping carriers. Negotiators have to cultivate trust for a long-lasting, beneficial partnership. Efficient communication with the shipping carriers helps in reaching a positive outcome.
By developing a strong relationship with shipping carriers, shippers can expect beneficial results. It could be in the form of deeper discounts on packages. Or it could be preferential treatment by shipping carriers during peak season. Further, mutually-accepted shipping contracts are ideal during shipping contract negotiations.
Experts at Audintel advise companies on negotiating shipping contracts. Our team consists of experts with industry knowledge and negotiation tactics. Further, we have professionally qualified staff that call and negotiate claims with the carriers.
Conclusion
The shipping environment in 2024 will be complex. However, shippers can negotiate shipping contracts keeping their shipping needs in mind. Companies have to work towards favorable shipping contracts. Partnering with shipping management experts can optimize shipping contracts according to your requirements.
Audintel’s shipping intelligence solutions give a complete overview of your shipping profile. We aid companies in focusing on the areas that require immediate attention. Our intuitive dashboard provides detailed clarity of shipping spend. We also give insights into the shipping rates of different carriers and their overall performance. Our negotiating expertise helps our clients in securing favorable shipping contracts.
In addition, Audintel’s auditing services help in identifying avoidable costs. We look into overcharges, service failures, and more. The information can be helpful when negotiating shipping contracts. Do you need expert help to understand the complexities of shipping contracts? Or in negotiating carrier contracts effectively. Then, contact us at +1 (619) 354 8539 or visit our Audintel website.