Negotiations with carriers are something that every Beneficial Cargo Owner (BCO) or Ocean Freight Forwarders or Non-Vessel-Operating Common Carriers must go through with their shipments – whether it is contracted cargo, tender cargo, or normal day to day spot business.
Sometimes, these negotiations can be intense because both customers and carriers could be under cost pressures and in cases wait to see who will blink first.
There are many factors involved in freight negotiations between carriers and customers.
For the carrier, they range from
- MQC (Minimum Quantity Committed)
- Frequency of shipments
- Validity required
- Demurrage and Detention free time required by the client
- Free time required at origin by the client
- Any other special conditions required by the client
For the customer, they range from
- Competitive and market-related rates
- Schedule reliability of the carrier
- Availability of space and equipment
- Guarantee against rollover
- Online tools that are available on the carrier’s site
- Carrier’s customer service
Traditionally, while carriers had good visibility of the customer’s shipments and movement patterns because they were carrying the cargo of the customer, the customer did not have the luxury of visibility of the carrier’s performance.
Digitalization and technology have been changing this scenario providing customers with tools that can monitor and track carrier performances through various metrics.
The current shipping industry is very dynamic in nature with several thousand sailing schedule changes occurring every single day across all shipping lines and trade routes.
Another big issue facing customers is the visibility of their ocean containers once it has been loaded on the ships and one of the metrics that a customer must consider during carrier freight negotiations is the container rollover record of the carrier.
Container rollover is a serious issue affecting on average between 5-17% of all containers shipped.
In some cases, containers may have been short shipped at the port of load or at transshipment port and customers might be blissfully unaware of the same till the ship reaches the destination and they find that their container is not on board.
Without the required visibility it is problematic for the customer to track schedule changes, find optimum shipping routes, and accurate port-to-port transit and arrival times for the containers.
For the customer, it is most important to identify and understand which carrier suits their requirements the best and which carriers they need to align themselves to.
If a customer has visibility of the above-mentioned issues, they can easily identify which carrier is the most reliable and secure in terms of carriage and delivery times. The customer can use such information to their advantage while negotiating with carriers as they are able to ascertain the strengths and weaknesses of the carriers.
Of course, the customer should not be naïve to choose only one carrier based on certain strengths that the carrier has or because their rates are the best in the market.
The customer must compare the information available through the usage of advanced container analytics data and use this information for smart freight rates and services negotiation with the carriers.
Advanced container analytics data can automatically detect service and port rotation changes of the various carriers on the same service, how often these changes happen and what are the consequences of such changes.
With the available digital technology based on advanced analytics, carrier and AIS data, the customer can check in-depth details of the carrier and their services such as sailing frequency, the name of the alliance, and the total TEUs within the service.
These technologies also allow the customer to monitor potential container rollover and where it could possibly be happening/happen
Such analytics gives the customer the edge when negotiating contracts or freight rates with the carriers.
Container data analytics such as the one provided by Ocean Insights provides the customers predictive and accurate data which allows them to benefit from better ocean supply chain visibility and consistently prove ROI.
Such information also gives the customer complete transparency of the market, the carriers, their partners, alliances, and the level of service they have been providing.