Tuesday, February 25, 2014

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.


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