Note: Today’s post is part of our “Editor’s Pick” series where we highlight recent posts published by our sponsors that provide practical knowledge and advice on timely and important supply chain and logistics topics. In this post, Sri Laxmana, Director of Ocean Services at C.H. Robinson, shares four factors logistics executives should keep top of mind as they develop an overall strategy for negotiating with ocean shipping providers this year.
The 2017-18 ocean shipping contract season is underway. As you evaluate your budget and ponder the best way to approach negotiations, you will want to keep costs down, consider options, and mitigate risks. But this year, there are four other key points you will want to keep in mind as you talk to ocean service providers.
1. The Hanjin impact
The bankruptcy of the Hanjin shipping line has thrown ports and retailers around the world into confusion. Giant container ships were stranded around the globe, and customers worried about whether the merchandise would reach their shelves. After the South Korean carrier filed for bankruptcy protection and its assets were frozen, ships from China to the U.S. were refused permission to offload or take aboard containers because there were no guarantees that the operators would be paid.
After this experience, some companies feel they need to consider their carriers’ financials and do all they can to avoid putting their cargo on carriers that they perceive to be at risk. While companies are understandably concerned, avoiding one carrier in today’s environment of mega alliances may not be the answer—the fact remains that the cargo will move with the carrier under a different bill of lading.
As I see it, the real lesson of the Hanjin bankruptcy is that companies should look beyond low price as the be-all and end-all of negotiations. Price is just one component of the decision-making process—not the only factor to consider.