Is your business accepting regular carrier rates? If that’s the case, you might be missing out on cost-cutting opportunities if you don’t negotiate. The ability to negotiate freight rates can allow you to turn your cost savings into profits.
Shippers must know where and when to apply leverage in order to effectively negotiate freight rates at freight ports of Russia and bargain for better services and rates. The following are the dos and don’ts of freight rate negotiations, as presented by CREDO TRANS.
Get Prepared for Negotiating
Know what you want and what’s available before you get to the negotiating table. Do your research on the current trends of the Russian shipping business. Do your own research on the shipping industry’s impact on economics, politics, and currency rates in Russia.
Determine your volume requirements and budget. Do you expect your monthly shipments to increase? Will a standard SLA (service level agreement) be required? What will your KPI for logistics be? The following are some important KPIs to include in your SLA:
- Freight auditing and cost reduction
- (RMA) Returned Materials Authorization
- Mutual inventory management: keep track of inventory
- Quality control upon receipt
Shippers and carriers can quickly determine competing rates thanks to technological advancements and multiple sources of rate indexes and market data. Find out what your carrier’s competitors in Russia are charging before setting up a meeting. The following are some price aspects to consider:
- Transit requirements
- Lead times
- Dimensions and weights
- Zip codes of origin and destination
- Rates for one-time events and special projects, contract rates
- Accessorial charges
Most likely you will get concessions at the meeting table if you do your homework and research the carrier’s competitors.
Lastly, CREDO TRANS is always ready to offer you the same level of service as our competitors at the prevailing market price, with concessions where available. By staying ahead of current or potential competition, our team of professionals can provide a competitive advantage with an option to compare prices. This is typically accomplished by assessing competitors’ strengths and shortcomings and determining where we can fill in the gaps.
Don’t Pay for What You Don’t Use
It’s a good idea to know what kind of service, price, and security you’re looking for. Discuss the type of services offered by your carrier and select the most relevant to you. Do you, for example, simply need your merchandise transported from Port A to Port B or do you ask for comprehensive customer service?
Do you only ship in certain seasons? What’s the point of paying for the entire year then? Can you give up speed in exchange for reduced rates? Let your carrier know what’s important to you.
Read the Contract in Detail
Look for hidden costs or inflexibilities that don’t meet your requirements, like the following fine-print items:
- Demurrage charges
- Allowed delivery and pickup time
- Transaction fees for cash on delivery (COD)
- Additional charges for holiday and weekend deliveries
Conversely, the fine print provides an additional opportunity to save money. You can, for example, trim down accessorial expenses like packing and unpacking fees.
Negotiating Price: How do you Agree on Transport Costs?
A carrier will offer a quote for a single shipment or a group of shipments. An electronics distributor, for example, would request quotes for transporting TVs from Asia to Europe. Requesting quotes for all of your business needs may encourage the carrier to provide a better solution and lower charges. In our case, the electronics distributor may fare better by requesting quotes for shipping refrigerators and stereos as well. In addition, the wholesaler can diversify destinations. If the wholesaler is doing shipping to multiple destinations, the carrier will likely give better rates.
Don’t Let Freight Rates Limit You
Experienced shippers understand that, while freight costs are important, other business considerations take precedence. Are there any operational issues you’ve had with the carrier in the past? Have you ever had billing issues or refund delays? Is there a history of the carrier delivering products that are damaged?
You should probably look for another freight forwarder if the forwarder you deal with has a high rate of complaints. Negotiate a concession and get compensation if the carrier is willing to resolve inefficiencies.
How do Freight Brokers Calculate Rates?
The freight rate is influenced by several factors: the shipping distance, the total size of the goods, urgency, shipment classification, and finally, by temperature needs—in case you are shipping perishable materials or anything that can be affected by climate and require temperature or atmosphere control equipment.
You must realize that rates are determined by supply and demand. Now it is easier than ever to comprehend the rates and the whole freight and logistics value chain due to the latest advancements in software and information technologies.
Build Relationships: Can you Negotiate the Freight?
Your carrier is an important link in your supply chain. Use your socializing skills to develop solid long-term relationships in the Russian seaports when negotiating freight prices. Future delays and price spikes can be avoided if you know how to form positive connections.
Keep in mind that a shift in a demand or supply curve occurs constantly. You may have a preferred carrier of your choice right now, but supply might change if the weather, politics, or economics shift.
Group Purchase Leverage
It’s challenging for many SMEs to negotiate reduced costs considering their lean inventory. By joining a group, you can take advantage of the collective buying power to get the best shipping rates. One of the main benefits of group purchasing is that proficient negotiators may lock in rates for up to six months.
CREDO TRANS provides a complete range of maritime freight logistics services, including FCL, LCL, and Break Bulk. Ocean freight shipping is a reliable mode of large-scale transportation, with choices to accommodate a wide range of cargo sizes. Full Container Load (FCL) and Less Than Container Load (LCL) shipping are two of them. FCL refers to shipments in which one party owns all of the goods in a container, whereas LCL refers to shipments in which numerous shippers’ items are packed together. Business needs and inventory requirements, as well as cost and commodity type, influence a company’s shipping selection. LCL, for example, allows you to have a smaller, more adaptable product inventory, whereas FCL is better for bulk items and high-volume products. The freight is charged on a full container load basis in the case of FCL. However, in LCL, the freight rate is calculated based on the cargo volume. Beyond a particular weight limit, freight is calculated based on weight rather than the dimension.
Conclude a Master Carrier Agreement
Incoterms (FCA, FOB, DAT, DAP, DDP, CFR, CIF, ExW, FAS, CPT, CIP, ) are terms that clarify obligations and aspects of international trade in simple, unambiguous terms so that shippers and carriers do not misunderstand each other when trading goods internationally. The terms specify how much the goods are worth, who will pay for freight and insurance, etc.
The purpose of the Incoterms is to eliminate trade misunderstandings, although the terms are not legally enforceable contracts. Shippers and carriers should have a master carrier agreement in place for their transactions, and they should observe the laws of Russia and the governing law of the countries in which or through which they trade. If any changes to the Incoterms are to be made, shippers and carriers can stipulate these in their master agreements.
A master (primary) carrier agreement is defined as a special contract that includes terms only applying to you. Other shippers are not offered the same terms by the carrier. In most cases, the master carrier agreement takes precedence over the standard tariff. As a result, if you enter into a master carrier agreement, the carrier won’t be able to change tariffs or other terms without your permission.
Why Choose CREDO TRANS as Your Carrier?
CREDO TRANS is a reputable freight forwarder with knowledge and experience in handling any type of cargo. Our instant-rating system lets you know exactly how much your shipping will cost before you book it.
We provide international shipping rates that are both fair and straightforward. At CREDO TRANS, we have an extensive global network of agents that enables us to offer a door-to-door shipping service at transparent pricing, with no hidden fees.
CREDO TRANS’ commitment to operational efficiency makes your freight move as planned.