Hi everybody, and welcome to another edition of The Brief, the audiocast series providing answers to the most frequently asked questions revolving around the complex world of ocean freight rate benchmarking and procurement. 

This week, as you already know, is all about freight contract negotiation. As we’re entering the negotiation season, we want to focus on what the best practices in freight contract negotiation are.

If you haven’t subscribed to our channel, go to your favorite podcast provider and search for Xeneta. Now without further a due, let’s jump right into it.

The general best practices involved in a freight contract negotiations are the following:

Take a soft approach! Being tough will not work in a business environment like shipping and freight. You must always take steps, however big or small, towards a mutually advantageous business relationship.

While pricing is negotiable, how you approach carrier rate negotiations may make a great difference to your bottom line.

Some fundamentals of freight negotiation such as benchmarking your rates against others should not be ignored.

A review of all sales and carrier contracts may assist with any savings on freight charges.

Always remember that ocean freight prices are volatile and freight rate negotiations are seasonal with peak season yielding a higher price.

Know your market and service patterns. Once you have that understanding, you can determine what kind of carrier rate negotiations to enter into. Long-term rate, short-term rate, quarterly rate, capped rate system, etc.

Understanding how a carrier works is also essential, such as how their costing works, what local, national and international requirements a carrier needs to fulfill. By understanding this, you can avoid some unpleasantness like asking the lines to drop some of their legitimate charges such as ISPS charges which are essential in maintaining the security of the ship, cargo, and port.

By studying the rate matrix developed from a shipper/BCO point of view across various trades, one can get proper visibility of the various surcharges involved in a freight contract.

The surcharges involved in a freight contract is also an interesting subject to explore in preparation for negotiations. We’ve compiled a list of these for you on the Xeneta blog. Head on over to xeneta.com/blog and use the search function named “Search Articles” and search for “surcharges”

Allright, that is it for this week’s episode of The Brief. Make sure to check back next week for more answers to the most common questions revolving around the complex world of ocean freight rate benchmarking and procurement. Bye for now!