Shipper | Best practices
How to negotiate ocean carrier contracts: 5 best practices for shippers
Ensure a smoother supply chain by taking control of your ocean carrier contract negotiations.
One way shippers can ensure a smoother supply chain is by taking control of ocean carrier contract negotiations. This sets you up for success as your product makes the first leg of its journey through your supply chain and gives you flexibility (so you can move those hot containers first) once it arrives at the port.
Key takeaways:
- Use current and projected shipping volumes when negotiating ocean carrier contracts to secure the rates, capacity and lanes your business will need.
- Define contract terms and accessorial charges upfront to reduce unexpected costs and clarify responsibilities.
- Involve drayage expertise in ocean carrier negotiations to evaluate carrier terms, service options and capacity across ocean and inland transportation.
5 tips for securing better ocean carrier contract rates and capacity
Below are our tips for ensuring you come out of your negotiations on top, and with more control, visibility, flexibility and access to the reliable capacity your business requires.
Plan beyond today's volume
Know your current volumes, growth potential and emerging markets to avoid multiple contract amendments for new origin/destination lanes before beginning negotiations.
This transparency in planning helps your carrier provide the best rates and capacity you’ll need. Looking at historical data probably isn’t enough given the current environment. The more work you put in on the front end, the better the service you will ultimately receive.
Align on contract terms early
Be organized and prepared to work with multiple steamship line (SSL) contract formats on both sides of the negotiation. To avoid surprises mid-negotiation, set upfront expectations on things like:
- Bunker Adjustment Factor surcharge (BAF) formatting
- Formula-driven levers, to avoid surprises mid-negotiation
- Chassis and other accessorial charges
Build strategic market relationships
Know the strategy and develop key relationships in all markets in which you operate – and work with a dray provider and commercial port liaison. Use this checks and balances approach ahead of conversations with each carrier on new service offerings, lanes and product offerings where strategic relationships could make sense and a mutual win could happen.
A dray provider like Schneider, who has relationships at numerous key ocean and inland gateways, can ensure your import strategy is optimized for your holistic North American network.
Negotiate the details
Be specific with your ocean carrier on terms like free time and caveats for things like cargo loss language and limits of liability. Everything is negotiable within reason.
As you negotiate these critical terms, keep your dray provider in the loop so they can provide you feedback on feasibility. This clear communication to both parties opens the door for creative and tailored solutioning.
Maintain control of your dray strategy
Consider contracting directly with a national dray provider for the access to capacity you’ll need and the flexibility you’ll undoubtedly require as we navigate market cycles. While letting your SSL manage your dray may seem easier than managing it yourself, it leaves you with a lack of control. What will your service levels look like? Will you get the capacity you need to deliver in this tumultuous and tight market?
If you prefer to keep your hands out of the weeds with a dray provider, let your ocean carrier know who you prefer to have dray your freight once it arrives at the port; this is commonly known as nominating your dray carrier.
Partner with a capable logistics provider who can provide you the right mix of service and cost
A dedicated capacity model and/or a control tower approach that leverages your logistics provider’s engineering, data science and network design capabilities will ensure your network is fine-tuned for success.
Schneider has decades of experience unwinding the chaos at the ports, best-in-class technology and a reliable presence at all major U.S. gateways. Our port logistics and supply chain teams can guide you to an optimized solution that ensures once your freight arrives, it moves swiftly out of the port and to the next destination in your supply chain.
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