Geopolitical uncertainties, the potential for more tariffs, strikes, threats of strikes at various ports, and possible waning consumer demand have resulted in ocean freight rates and surcharges increasing on some trade lanes while declining on others.
Shippers can take several proactive steps to navigate these challenges. Regularly reviewing invoices helps identify unexpected or excessive surcharges that shippers will need to negotiate. Common surcharges in invoices include peak season, equipment imbalance, bunker adjustment factor (BAF), and security and terminal handling charges (THC) at the origin and/or destination.
Understanding the numerous surcharges is certainly important but also understanding the wording in the agreement with the carrier(s) – For example, what does the rate include? Is the rate port-to-port or door-to-door? Does it incorporate surcharges? What about detention and demurrage fees?
Before agreeing to a quote and/or contract, the shipper needs to understand their needs and situation by analyzing market and shipper-specific data, indices, and benchmarking services.
Locking in fuel costs through long-term contracts, for example, can potentially provide stability. But shippers could miss out on lower costs if they lock into long-term contracts so shippers will need to analyze the market carefully and perhaps ask for specific wording in contracts to mitigate this possibility.
In some situations, a carrier may have neglected to add some shipping surcharges to an invoice and request payment. This could prove costly for the shipper particularly if the shipper’s customer refuses to pay additional charges after the business has been concluded. In this situation, a third-party audit of the invoice and carrier quote will help with this issue.
For Ocean Auditing here are some bullet points you should be aware of:
- 25% of invoices during COVID timeframe were over billed and overpaid, never recovered.
- Now is the time to recover up to 3-4% of your ocean costs for the past 3 years.
- Normally within weeks you could be viewing confirmed recoveries.
- No one “audits the auditors”. Have been successful in recovering over $100M in cumulative recovery for Nike, Gap, Crocs, CVS, Dow, General Motors, Michael’s, Rio Tinto, First Solar and others.
There are also other ways to reduce costs. Shippers can consolidate shipments to minimize the number of container moves, optimize packing methods to utilize container space effectively and leverage advanced logistics technology for route optimization.
Identifying and mitigating risks related to ocean freight disruptions is also important in reducing costs. Events like port strikes, natural disasters, or geopolitical tensions can lead to sudden rate hikes. Diversifying carrier options and shipping routes can help reduce dependency on a single provider or region.
Don’t forget insurance coverage. Insurance can further protect businesses from financial losses due to delays or damages.
Another area often overlooked is incorporating sustainable practices. This not only aligns with environmental stewardship but also yields tangible cost-saving benefits. Sustainable practices, such as optimizing voyage routes and adopting slow steaming, often lead to more efficient operations. These practices reduce emissions and improve the overall efficiency of shipping operations, potentially leading to faster delivery times and reduced operational costs. Sustainable practices can also protect companies from the volatility of fuel prices and the potential costs associated with carbon pricing mechanisms.
Finally, staying up-to-date on market trends is very important. Shippers should regularly monitor industry reports, trade news, and rate indices to identify opportunities or potential costs.
By taking a proactive approach, businesses can better manage ocean freight surcharges and maintain a competitive edge in global markets.
To learn more about how SLB Performance and it’s world class partners can help you lower your ocean freight costs contact us.