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2022 Contract Negotiations: Another Year of Historic Change

Updated: Mar 30, 2022

With contract season upon us shippers need to accept that the pre-pandemic way of trying to negotiate the best possible deal with the most incentives is now a thing of the past. Space and equipment are now key.

In the long-gone market of 2018, many high-volume shippers would generally sign fixed rate contracts with carriers and use NVOs to take advantage of lower spot rates when prices dropped. However, in this market’s current evolution, carriers are no longer offering a significant amount of contracted space with fixed prices and are instead favoring the spot market with the majority of their space as strong demand far exceeds supply.

This separates 2022 from negotiations that took place at the heart of the pandemic. For your average shipper, organizing an end-to-end supply chain strategy on the spot market with a carrier as the year unfolds can be costly and unreliable. Therefore, importers need to be able to adapt to these new conditions and adjust their supply chain strategies accordingly.

“The new market is forcing shippers to understand the additional burdens of guaranteed space and equipment, congestion and blanked sailings, and how leveraging the spot market is different when working with a forwarder versus working with a carrier,” said Anthony Fullbrook, president of OEC Group’s North American region. “Consulting with supply chain experts and planning in advance with a forwarder can be helpful for shippers with limited transportation options. Those shippers with more offline port pairings and more pressing deadlines must plan further in advance and work with proven specialists.”

One unique characteristic of freight forwarders on the spot market is agility. If a forwarder has established allocation and equipment with multiple carriers, they will have access to a wide range of shipping options and guaranteed space. By partnering with a forwarder, the available shipping options increase exponentially rather than signing with a limited number of direct fixed carrier contracts. If you’re open to considering nontraditional routings using secondary port pairings and land transportation routes, your number of alternatives with a forwarder will grow even further.

“By collaborating with a freight forwarder, planning well in advance, and keeping an open mind to different routing strategies, shippers can use the spot market to ensure that properly organized orders will be delivered in a reasonable timeframe, and when possible, ahead of the congestion delays currently plaguing our industry,” said Peter Hsieh, Vice President of Sales and Marketing for OEC Group’s North American Region. “Identifying new transportation routes for your products, prioritizing delivery windows, and developing a deeper understanding of the congestion and blanked sailings, you will undoubtedly help businesses remain healthy and viable for the foreseeable future.”

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