Three Tips For Negotiating Ocean Contracts

If you've ever been involved in negotiating a contract with an ocean carrier, you know how complicated it can be.

You're bombarded with hundreds of surcharges, and each carrier uses their own system, structure, and rates.

These contracts are comprehensive because they have to cover every possible contingency. But that doesn't make negotiating them any easier.

So how do you make sure that you're not chained to an unfavorable contract for years?

Take a look at what to do BEFORE you negotiate any ocean contract for the best results.

First - Find Out What You Actually Need

Do you only ship freight during certain seasons? How much capacity do you need? Do you need extensive customer service or do you just want barebones freight?

These are questions you need to ask yourself before you begin negotiating. Carriers assume certain things when you're getting a quote. If you don't go in knowing exactly what you'll need you'll be slammed with charges and fees for services that are completely irrelevant to your business.

Know the level of service, security, and price that you're willing to accept and you're already halfway to a favorable outcome.

Second - Take Current Market Conditions Into Account

The key to getting what you want in a contract negotiation is being able to anticipate the responses of the other party. How are the rates looking in today's market? Are they likely to try to lock you in to a yearly contract? Will they be trying to push more services on you than you need?

The more you study, the more likely you'll know what 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.

It'll also let you avoid any surprises when they start naming numbers.

The last few years have been terrible for ocean carriers, and they've raised rates tremendously to combat that. Experts suggest that you always look for short-term contracts in today's climate, simply because the pricing is so volatile. Certain carriers have been dropping prices quite drastically to attract more business.

Short term contracts will also let you slip out of any agreements if the conditions on the ground change suddenly (as they have recently).

Third - Don't Just Focus On Price

Whoever you're trusting with your freight is going to be responsible for a major segment of your business. Any problems on their end will mean problems on yours.

Therefore, don't just look at price when you're looking for a carrier.

Are they reliable? What level of product security and insurance do they offer? Would they be able to accommodate your needs in terms of capacity during peak seasons?

There's nothing worse than having tons of willing customers who want to buy your product - and not being able to get your product to them.

All these tips share a common factor if you want the best results from ocean contracts...

Do your homework.

Proper research and planning before a contract negotiation will ensure that you come out ahead.

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Manage your ocean rates and contracts more efficiently. Work faster, quote smarter with QMS and QMSlite from Catapult International - www.gocatapult.com.

Freight Forwarders: Here's the #1 strategy for bidding on RFPs

It's no surprise that most major shippers utilize formal RFPs to negotiate shipping rates.

After all, it lets them compare proposals with the same information - making comparison between forwarders that much easier. It lets them state exactly what they need, and get pricing for that particular part of their business. And once word gets out an RFP often makes forwarders come to them, which can increase competition.

All in all, it's a win-win for shippers.

But for the freight forwarder like you, it's less ideal. You have to adapt your bid to suit their needs, rather than focusing on the strengths of your business. Usually this means simply providing a price by which your whole bid may be judged. But more importantly, it becomes difficult to stand out outside of price when you're competing with so many other bids.

So how do make sure you're maximizing the return on every bid you make?

Here's the secret strategy experienced freight forwarders have learned about RFPs that might come as a shock:

It's not about winning the bid.

Wait a minute, you're saying. If I don't win the bid, what would be the point?

Here's the thing.

You're not always going to be able to offer your services at a price lower than your competitors. 

In fact, you probably won't be able to in most cases. And the undeniable fact is that shippers using RFPs are going to give priority to the cheapest bids.

So in those scenarios where you KNOW you will be undercut on price by a substantial margin, you should bid anyway.

Even if you are certain you will lose.

The reason is that your lower-priced competitors probably cannot offer the same level of service you can. Often, they've underestimated how much the contract will cost them in operating costs, and realize they are losing money, or just not making enough for it to be worth it.

In these situations, it's not unusual for the shipper to drop the forwarder due to bad service, or for the forwarder to drop the contract.

If you make a good impression in your bid, even with your higher prices, you will be in a strong position to pick up certain lanes if anything should happen.

So your goal going into these losing scenarios should be to create a relationship with the shipper - giving you the possibility for business together down the road.

Alternatively, you can aim for only winning some of the bid, while letting others go to competitors.

Whatever your decision, you should choose whether you want to win the bid, win only part of the bid, or lose (but make a strong impression) before you actually bid.

In this way, every bid you make is a potential business investment that may bear fruit in the future. So you'll never feel like you've wasted time on an RFP.

Here are three other tips:

Always describe what your company offers that makes you different from your competitors.

Don't forget to take seasonality into account when bidding.

And, feel free to add supporting material to enhance your bid within the framework of the RFP.

Once you adapt the spirit of "losing to win," you'll find that RFPs offer an entirely new opportunity for business.

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Springboard by Catapult International provides easy to use software that helps forwarders and NVOCCs quickly and accurately respond to complicated RFPs - learn more.

Freight Forwarders: Here Are 3 Keys To Attracting More Business

It's rough sailing in the seas of logistics right now, especially if you're a freight forwarder.

With carriers raising their rates, it become less profitable to import or export products. That makes it harder than ever for you to get new business. And if you're like most freight forwarders, you might not be taking full advantage of what you have to attract new clients.

There are several incredibly easy methods of making sure you are maximizing your lead generation and client list.

Here are three of them:

Secret # 1: Don't Just Focus On Price

Now, you know that many of your prospects come to you because you can get them the best rates on shipping.

And that's important.

But you offer something much greater than being able to save them money: Your expert experience from years of handling freight.

You know just how valuable that is when it comes to making sure everything goes smoothly.

• Whether it's getting shipments through customs in days instead of weeks...
• Whether it's making sure that freight going across the water is totally secure and insured from the worst threats, without breaking the bank...
• Whether it's negotiating with carriers to save your clients time and money they didn't even know was on the table...

That experience matters. And you NEED to sell THAT to your prospects.

So next time you're talking about your services, explain exactly how you can help your clients outside of just getting them the best rates. In fact, you should put a price on your expertise whenever you can. You can even market that that initial conversation with a prospect as a free consultation.

You'll be surprised at the difference it makes.

Secret #2: Communicate. Communicate. Communicate.

How many times have you gotten business simply because you happened to talk to the right person at the right time?

Freight is seasonal. And a client who needs something moved today might have another job for you in a few months. But only if you talk to them about it.

So communicate.

DON'T ASSUME that if your past clients and prospects need freight moved, they'll automatically think of you. You need to remind them. Constantly. And it doesn't need to be a hard-sell.

Send them holiday cards or e-mails. When you read a particular article online or in the newspaper that relates to them, mention it to them. Keep track of what they're doing on LinkedIn and congratulate them on milestones.

If you keep it up, we guarantee that you will hear that sentence: "Great to hear from you, do you happen to handle...."

Secret #3: Get More Leads With Automatic Online Quotes

In the modern day, your website is the face of your business. So it's not surprising that most freight forwarders today get a vast majority of their business through their online presence.

Now, most websites have something like a "contact us" page. The prospect fills out their information and sends it. Then you reply with a quote and engage with the prospect.

But there's a problem with this method: They just want a quote. And they don't want to wait hours or days for it.

One method of drastically increasing the number of inquiries you receive is to use an online form that will automatically quote rates. Your customer can then book the shipment right there, on the spot. There is no delay from extra phone calls and waiting for someone to get back to them. 

Rate management software like Catapult International's QMS and QMSlite products are cost effective tools that enable you to offer real time quoting from your website. 

Growing sales is often a matter of eliminating friction from the selling process - and the "back and forth" of quoting creates a lot of that friction. Aside from the other benefits of a rate management solution, online quoting maybe the best way to improve sales for your business.

It enables you to capture all those people who are reluctant to talk to someone just to get a quote. More importantly, it's a feature that your competitors most likely won't have.

A recent survey of forwarders shows that less than 25% of your competition has this capability.

The question was posed to a group of forwarders about their process for how they get quotes to customers. The goal was to find out how many companies were taking advantage of the available technology. The four responses included:

Customer calls you on the phone: 22%

Customer send you an email and you email back: 44%

Form on your site and you email back: 11%

Instant quote on your site - no waiting: 23%

This may be the competitive edge your business is looking for.

There are hundreds of other methods of getting leads.

But there is a saying that comes to mind:

"Choose just three ways of getting clients, and do them well," said a great marketer. "You will have all the business you can handle."

What is a GRI (General Rate Increase)?

It's a term that only people in select industries become familiar with.

Maybe whoever handles your freight recently raised their fees. Or perhaps your freight manager just told you that it's going to cost a lot more to get those products in from Asia.

They tell you this is the fault of something called a General Rate Increase, or GRI.

Here's an explanation of what that is, in plain English:

A GRI is when ocean carriers raise their fees for ocean freight.

That means if it's going over water, they will charge you more for getting things where they need to go. 

Correspondingly, freight forwarders, importers, and exporters have no choice but to raise THEIR rates to offset that increase.

GRIs are terrible news for anybody who relies on international freight. And there were hundreds of GRIs and Surcharges implemented by ocean carriers in 2013 alone.

So you might ask the question:

What's going on with the industry, and more importantly, why does it keep costing you more and more money to do business?

Why A General Rate Increase?

It's been a rough few years for shipping and freight, and it's also the reason why there have been so many GRIs.

Ocean freight carriers are losing money.

In fact, some are only saved from complete collapse by government assistance.

There are many reasons, but the main one being something all of us can sympathize with - high gas prices.

The cost of fueling a 60,000 ton cargo ship making a journey halfway across the world is astronomical. 

Accordingly, even a small increase in fuel costs can have a huge impact on the operating costs of freight carriers.

Fuel costs have remained stubbornly high since 2011, so it's no coincidence that there have been a large number of rate increases since then.

But it gets worse.

Overcapacity. Competition amongst services. Declining demand due to high rates.

It is a vicious circle that is detrimental to both the carriers and anyone seeking to move freight.

How To Minimize The Effects Of General Rate Increases

Freight carriers have continued to remain unprofitable even in 2013.

Which means you shouldn't expect the rate of GRIs to slow down anytime soon.

Depending on the ocean carrier, the price of a GRI can vary dramatically. In fact, competition among carriers sometimes causes certain carriers to forgo rate increases!

If you are planning to move large volumes of freight this year, we suggest the following:

1) Do It Early:

You can expect more rate increases this year, no matter what carrier you're using. If you can, try to get your product shipped as soon as possible to avoid the price increases BEFORE they happen.

2) Compare Rates Before You Commit:

Different ocean carriers will have drastically different prices. The carrier that is the most affordable today might not be two months from now. There has been extreme fluctuations in pricing, especially during these last few years. For this reason, we suggest you carefully pay attention to CURRENT rates and how they change. You can easily do so by using software that makes it easier to compare rates automatically.

A General Rate Increase is detrimental to everybody it affects.

But with some planning, you can minimize the effects of any GRI and avoid rate increases before they occur.