How to negotiate better ocean freight or transport rates

If you think that when you are on a buyer’s side you rule, you are out of your mind in logistics industry. This is a place where just being a buyer doesn’t mean anything.

When we talk about buying negotiations in area of ocean freight or inland transport we are working in an extremely complex world full of business relationships inside of the market between trucking companies, ocean carriers, freight forwarders, high volume accounts and different business stories related all together.

Negotiation from a strategic point of view (let’s call it the conceptional world) is a process which goes on in an evolutionary way. What is means? It means that the position of your business is being developed and changes as the time flies. Once you have account with 1000 TEUS other times you won’t. You are not able to buy your position (otherwise you lose money if the money is a goal) – I will pay more than what market pays just to get the deal.  You are not able to plan (too many people and too many factors affect the process to be able to plan or forecast the direct outcomes) – I assume that they will give 750 EUR from Warsaw to Berlin for a 13.6 FTL with a year validation. But mostly we are landing in the area where we want to, in the place called ZOPA – zone of possible agreement.

Is a WITFM concept known to you? It’s a simple shortcut but it means a lot – What is there for me. This is always a core question to be asked yourself when you are planning to develop some better possibilities for yourself and invest your resources – time/money/energy.

Afterwards you ask yourself second question – What is there for them? The answer for this one determines will you receive good rates to play. Once this is volume (teus/trucks/orders) otherwise we have profits (income/margins) next time we have a relationship (bonds/mutual stories).  

Remember: Negotiations are complex processes not a points on a timeline and are always driven in contexts of past and future.

Somethings you are opening other ones you close. You buy those rates on this direction and on the other day you lose a customer and someone else receives better cards. But relationships remain and on them you build your position in the future. From this point also you take advantage of them.

Know your negotiation position – business done previously
In this area you need to remember that to receive a good rate from a trucking company, forwarder or ocean carrier you should have done some business previously with them. Otherwise you a stranger and as we know, no one wants to have fun with strangers. Don’t we?

Consider all possible options what/if/then
If you don’t get good rates for the deal what then? Are you planning to lose the contact with a forwarder? Or try to work something out with new potential deal on different route maybe? This is kind of “let’s work out something together” industry. First RFQ is just a beginning – be prepared for different scenarios.

Consider potential relationships and links with of your opponents
Imagine that business was done previously without you. How could it! Yes, the world moves on with or without you. Someone was and still is taking a really good care to secure direct named account rates and business. If you think you take it on the spot – do something else, maybe sell some FMCG?

Establish strong rapport
If I like you maybe I will do some favor for you. If I don’t like you, then you can be sure that you receive the highest bids or event you won’t receive any service. Of course, if it doesn’t affect the business. This is how this world works. Better show respect and try to build a good trust environment on a people’s level at first.

Reputation of you as a professional – means that you are serious, and you know what to do
There is nothing worse than working with amateurs. Providers and quotation or pricing departments know this very well. But when you know how the business, accounts and competition works as well as connections within the industry then your name supports each received quotation in your favor. Maybe it’s about respect to the game?

Reputation of your business – matters
Are you representing a strong player in the city? Who does hundreds of orders and works with big fishes? Well seems that you are strong enough to deliver such numbers. If so, then it’s better to have you on board than on enemies’ side and provide you a quite better rates or give a few empty spaces on a overbooked vessel. Isn’t it?

Set the long run as your goal
You wont win. Maybe you will, once. Twice. Many times. But not always. Be prepared for this. You need from a trucking company to provide you a 1500 EUR rate to get a deal in some direction where 1700 EUR is the lowest possible rate which your truckers may give you? We need to live on and loose some transactions today to receive new ones tomorrow. Think about tomorrow that you will need to have friends to talk to about new chances.

Be visible in big business – prove one’s courage
Train your muscles even when they are not strong enough to deliver service to a big account. Yet. Prove in the market that you are trying to get a bigger deal – that is really important. By this you are sending a message – hello, I am here.

Does it sound funny? It really isn’t.
Things like reputation, volume of potential business, recommendations, creating a good trust ground, relationships or lack of them – this all matters. To be strong and to receive good cards to play from your service providers in logistics industry you need to invest in business at the first stage. Otherwise you are no one and you have no potential value.

Get into shoes of a person or company which you are trying to buy service from and ask yourself a question – Why they should give me better rates than to someone else with whom they have relationships and business done already?

Of course, in communication process you are always able to use some techniques and tactics or method – you can push, you can bluff, you can take the hardball, you can as well bargain – but in general it is always a matter of business and its powers, scale, advantages, people that you represent.

If you find this article valuabe share your opinion below about how do you find those aspects in your daily business life in logistics industry.

Autor: Dawid Wardin

Pracuję z firmami branży TSL. Ułatwiam im rozwiązywanie problemów - biznesowych / sprzedażowych / strategicznych - poprzez współpracę z zespołem. Daję im wskazówki jak działać, oni działają i to działa. Dzięki temu łatwiej rozwijają się w branży.

Dodaj komentarz

Twój adres email nie zostanie opublikowany. Pola, których wypełnienie jest wymagane, są oznaczone symbolem *