BCOs and shippers now planning their 2024 ocean tenders will no doubt be hoping to secure lower rates and at the same time the capacity they need at an acceptable level of carrier service. But what are the tools and ’other areas’ where there may be scope to improve bid results and reduce risk?

In this Logistics Executive Briefing, our Supply Chain Advisory team share some tips, innovations and practical views based on their recent experience of running outsourced global tenders.

1. Minimise the ‘other costs’ besides base ocean rates
Alongside reducing base ocean rates, it will now be more important than before to reduce ‘other costs’, in particular logistics admin costs (such as the cost of running your ocean and air freight tender), detention and demurrage costs (which often run into millions of dollars for medium and large shippers), emission regulations or the new so-called ‘ETS’ surcharges on European routes, and other costs.

So, ‘other costs’ to target besides base ocean rates include:

Logistics admin costs
Detention and demurrage costs
Emission regulations / “ETS” surcharges

2. Set realistic target rates as part of your bid

The container shipping market is becoming more favorable to shippers and there will be further reductions in contract rates available to professional buyers – although we must stress that, the more rates fall, the harder it will be to secure further rate reductions!

Use a benchmarking provider to tell bidders what rates you expect, to increase competitive pressure and to be confident about what you can actually negotiate.

You can even provide feedback to bidders via a bid tool to let them know how far they are from the target rates (see point 4 below).

3. Re-evaluate your supplier base
This is important not just to minimise costs, but to obtain a higher level of service quality and to ensure stable, predictable logistics operations.

By re-evaluating your supplier base and relationships, you can ensure that it fits the current market place and is future proof for your business.

Competitive analysis enables shippers to understand if they have the optimum number and type of service providers to meet both current and projected needs and protect against market disruption.

4. Save time and raise bid process efficiencies by using an advanced, integrated bid and benchmarking tool

Even medium-sized shippers are now using advanced, low-cost, usually cloud-based and largely automated bid tools, which provide fast analytics on bid completion progress, scenario results and optimization to select the best combinations of carriers and rate offers and other benefits.

Stop using Excel spreadsheets for complex global tenders!

Best practice is to have benchmark rates integrated into the online bid tool – something which Drewry and our bid tool technology partner Freightender now offer.

5. Make knowledge-led planning decisions, particularly to mitigate risks
Our 5th way to improve your bid planning is to make knowledge-led planning or strategic decisions.

With supply and demand weighted in shippers’ favour, geopolitical, climate events, medium-term regulatory changes and multi-year labour negotiations causing port strikes will have a more significant impact on supply chains.

With this in mind, understanding the potential impact of events such the Longshore negotiations on the East Coast in 2024 or the introduction of ETS carbon surcharges will be crucial in business continuity and containing spend.

One example to highlight is the risks which will arise before or around September 2024 – put this into your calendar – about potential labour actions by the ILA at US eastern and Gulf ports. Shippers need to arm themselves with the relevant market intelligence & insights to plan and mitigate potential risks.

Source: Drewry