The Benefits of Negotiating Long-Term Freight Rates

The Benefits of Negotiating Long-Term Freight Rates

Read Time: 4 min. 

As global markets continue to shift, volatility seems to be the only constant. This is true for just about every industry, including shipping and logistics. Carrier pricing is directly affected by everything that’s going on today. COVID-19 has spurred a massive surge in consumer demand, but that is only one factor. Tariffs, embargos, and trade wars are not only changing the way manufacturers conduct business, but it’s also changing how shippers operate.

Much like financial markets and interest rates, it makes good business sense to buy low, which is why right now is an excellent time to start thinking about negotiating long-term freight contracts. Taking advantage of low pricing now can be hugely advantageous going forward, as your pricing will be locked in.

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What’s Changed?

Historically, shippers favored long-term contracts. It made it easier to forecast and provided a basis for competitive pricing. However, the past few years have seen extreme volatility, especially in the ocean freight market. As a result, many shippers moved short-term commitments to avoid getting locked into a less advantageous deal.

Call it the Amazon effect, call it what you will – logistics was experiencing an intrinsic shift. Multi-carrier routes became more common, and there was a lot more competition in the industry. As new players and new methodologies emerged, it was getting harder to predict what lay ahead.

A short-term contract allowed shippers to try out new partners and make changes as needed, and in the effort to keep costs as low as possible, it was a good strategy. However, many companies learned that the grass isn’t always greener. There are a lot of qualities associated with being a good carrier, and pricing is just one piece of the puzzle.

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What Affects Carrier Rates?
When you’re negotiating a long-term contract, you must consider every part of the equation. Some of the factors that affect carrier rates include:

  • Service charges from port authorities and terminals.
  • Seasonal surge tends to push prices higher everywhere.
  • Fluctuating currencies. The USD has swung wildly over the past year, but its current strength against global currencies gives you a lot of extra buying power.
  • Fines for port delays are a consideration when shipping volumes are high. Does your carrier have a good track record of keeping to their schedule? This could affect your cost.
  • Rising fuel prices will directly impact your freight charges.
  • Container capacity is often a key issue in pricing; if containers are not filled to capacity, it will drive up the price.

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How Having a Freight Forwarder Benefits You

Working with a freight forwarder like DTS World Cargo offers many benefits; among them, you won’t have to negotiate with shippers to get the best pricing and service. We do all the legwork for you so you can focus on growing your business.

Pricing is only one part of the bigger picture. When you work with DTS, you can be assured of quality, reliability, and transparency from end-to-end. We take great pride in providing world-class service you can count on, including long-term competitive pricing and exemplary customer care.

Reach out today to request a quote. We’d love to learn more about your shipping needs and show you how we can help.