Shipper-ocean carrier contract talks, which are never smooth in the best of times, are even more uncertain than usual in this hyper-turbulent year.
Questions about when the market will return to normality, and, if it does, what that will look like, are just two of the many unknowns facing shippers as they plan for the year ahead. Carriers like to see shippers back up their demands for vessel space with forecasts of the cargo volume they expect to move. But even Nostradamus would likely fail miserably at that task in the current climate.
The environment is particularly difficult for small and medium-sized shippers who are jockeying to reduce costs while securing quality service, and know they can’t compete with big shippers, who have the cargo volume and muscle to demand premium deals.
One thing that small and medium shippers can do, however, is to take a leaf out of the playbook honed when trucking capacity got tight in 2018: Try a little tenderness. Look for sweeteners and ways to curry favor with carriers that may cost little but can help position the shipper for better service in the coming year.
That is what is broadly known as Shipper of Choice – a shipper known to be easy to work with, flexible, and willing and eager to find ways to make the carrier’s life easier.
In this article, we'll explain what a Shipper of Choice is and how to become one with your carrier partner.
In the trucking sector, when tractor-trailers and drivers became scarce, shippers developed strategies to assist truckers and their employers in the hope of improving the shipper’s chance of booking an available truck at a reasonable rate when they were hard to find.
The strategies were big and small. They ranged from reducing trucker waiting times at the shipper’s warehouse, to providing drivers with a bathroom, refreshments, and a break room. Shippers made sure trucks had easy access to the dock. And shippers offered flexibility by offering to accept deliveries at unusual hours, including in the evenings and weekends.
While the shipper-trucker relationship is somewhat different to the one between shippers and ocean carriers, the benefits of being Shipper of Choice can be just as strong.
So how can shippers become a favored partner of the carrier? Below we outlined three strategies.
One way is to work at creating a good partnership throughout the year, and not just at contract time. Shippers can look for ways to work with carriers to improve efficiency by setting goals, measuring performance, sharing results and developing corrective action plans together.
Shippers might also want to avoid rigidly focusing on price and instead look for service quality benefits that may cost the carrier little. That will reduce the chance that when vessel space is tight the first containers to be left on the dock are those of the high-priced, low-yield shipper.
The shipper’s goal is to form win-win solutions that can help obtain the carrier’s trust. And a sound way to do that is to forge a reputation as a shipper that stands behind its volume commitment.
That commitment, of course, is something that we at NYSHEX believe in wholeheartedly. The strategy forms the foundation for the two-way committed ocean contracts that populate the NYSHEX exchange. They require shippers to deliver a specific cargo volume, and the carrier to move it on time, with penalties if one or the other side does not fulfill the basic tenets of the deal.
We believe that these contracts foster efficiency, allowing both sides to plan better and the carrier to use vessel space more effectively. The contracts can also curb tension between shippers and carriers because both sides know their responsibilities and are confident that the opposite party will stick to them.
That dynamic can also help small and medium-sized shippers gain Shipper of Choice status with the carrier. After all, the carrier knows that the shipper, by signing an NYSHEX contract, has committed to actions that are almost unfailingly fulfilled. Ninety-nine percent of the NYSHEX contracts signed are completed and fulfilled based on the agreed terms.
That kind of certainty is sure to help make the carrier’s life easier as it grapples with today’s roller-coaster market.