Freight rate negotiation is a must when conducting international trade. The way you negotiate freight rates tells a lot about your export or import business. Freight negotiation with shipping companies can either promote or degrade your business. Market conditions, such as geopolitical conditions, shipping costs, and fuel prices, also affect rate negotiation in logistics. Freight rate negotiation with carriers can help you consider factors like cargo quantity, weight, and available capacity to get the competitive rates for exports. If you can understand the right freight negotiation terms, you can expand your profitable business in the long run.
The 9 best tips on how to negotiate freight rates are as follows:
1. Be ready to negotiate : Before entering negotiations, it's important to fully understand your needs and available resources. Analyze the latest market trends in the shipping industry and stay informed about currency fluctuations and changes in the political and economic landscape. Do evaluate your volume requirements and budget. Several factors, like demurrage fees, free time, detention charges, and the logistics of picking up and returning empty containers, can end up adding to the higher freight cost.
2. Address your freight rates : You can negotiate freight rates with the carriers or freight forwarders after having clarity about your freight needs, and accordingly, you can place your terms and conditions. You can also use data to pinpoint the suitable transportation modes, routes, and stipulated delivery times for your shipments.
3 . Consolidation of the shipments : If you want to save on shipping costs, you can consider combining multiple shipments into a single one. This strategy will help to reduce the amount of cargo that is intended to be transported, which can enable you to negotiate a competitive freight cost. Opt for Less Container Load (LCL), which makes it easy to load the goods into a large shipping container.
4. Try negotiating with multiple carriers . When it comes to negotiating freight rates, don’t just settle with a single carrier. Interact with different carriers and compare the quotes. This will enable you to ease the negotiation process, and you will be in a position to make competitive demands. The more you negotiate, the better price deals you will get.
5. Objections: Negotiating shipping rates with the carriers is likely to encounter various objections. You must listen carefully to the carrier’s perspective to understand the reason behind those objections. Maintaining composed behavior and presenting alternative solutions that match with goals and the carrier’s limitations can address objections.
Sometimes, the average spot rates are reasonable for their current market value as compared to the contract cost. Though the contract rate can enable more savings in the future as they are locked for a fixed amount of time, it is advisable to consider both while negotiating freight rates.
6. Establish Strong Bonding: Though transactions play a major role in global trade, your role as an exporter or importer doesn't end here. If you are working with a carrier or a freight forwarder, you must respect their opinions and confide in them. This will help you cultivate a strong relationship with them. Not only this, but you can come up with better negotiation terms every time you conduct a shipment. By working closely with them, both parties can get the right shipping solutions.
7 .Pay only for the required services: Try to negotiate with your carrier by checking the aspects of the price contract, which include added services, insurance, applicable fees, and other relevant services. Put in a contact to make sure that the details are followed over time. While negotiating with the carriers, you must consider these variables that can affect the entire shipping cost.
8. Go through the fine print: Don’t forget to read the entire agreement, including the fine print. Having a clear understanding of the document can help you check for restrictions and limitations and negotiate reasonable freight rates. You can take into account certain factors like hidden costs, loading and unloading charges, and demurrage fees.
9. Avoid peak seasons: If you conduct shipments during off-peak periods, you can obtain competitive freight quotes. You can compare the quotes of various shipping lines and book a vessel schedule in advance or after the peak season goes down. Most of the carriers offer a lower rate in the off-seasons to keep their business running smoothly.
Some dos and don'ts of negotiating freight costs are listed below:
- Sign the contract in written format (Do): Keep in mind to sign an agreement with the approval of both parties to negotiate freight rates.
- Never be unprepared (don’t): Stepping into a negotiation without having knowledge of the operational costs and other key information will end up costing you additional expenses.
- Step away: In some cases, a negotiation might not work out between the two parties. It is wise to walk away if you are not getting favorable freight rates.
- Avoid the hidden costs. (Don’t): Check out for any hidden costs or any additional surcharges that might create an obstacle to negotiating the required freight rates.
At Citrus Freight , we have an expert price consultant that can offer you a detailed list of the breakdown costs to make the freight negotiations easier. The team can provide you with reliable freight forwarders and carriers to ship a variety of perishable goods and get competitive freight rates for every single shipment you make.
If you still have any doubts about freight rates, contact our Citrus team right away.
Conclusion
Negotiating freight with the carrier can be done with proper communication and accumulating the necessary details, such as comparing quotes from different carriers and elevating agreements in both verbal and written format. You can get reasonable freight rates and avoid incurring additional costs. Managing accurate freight rates promotes a seamless shipping process for both import and export operations.