Ocean Freight Rates Are On The Rise! Have You Renegotiated Your Rates Lately?

Ocean freight rates are on the rise. This is particularly true of ocean container shipments. In the last three months average ocean freight rates (container transport particularly) have climbed up to 55%. Have you renegotiated your rates lately? If not, now is the time!

Effectively negotiating ocean freight is not so simple and depends on knowing a fair amount of detail. Will you have many “one-time” shipments, or more a repetitive business with each shipper? How much product are you shipping at one time, or if repetitive, each shipment? If repetitive, how often? The answers to these questions also determine if you want to use a freight forwarder or negotiate directly with the ocean carriers.

Door to door transit time is also a huge consideration. Will you ship to a major or “gateway” port and then truck to multiple distribution centers? Or will it all go to one DC? If you are planning on moving the containers intact to an inland DC, some difficulty may arise depending on the ocean carrier, and rail charges can be quite high.

There are quite a few charges that may be a part of the total ocean / delivery transport costs on a typical import shipment. Some may be negotiable with the carrier / forwarder (given sufficient volume and frequency) and if you understand how ocean freight rates are calculated.

Some of the most common ocean freight cost components are:

BAF - Bunker Adjustment Factor Surcharge
CAF - Currency Adjustment Factor
PSS - Peak Season Surcharge

… and 10 to 15 more depending on your actual contract and shipments.

Depending on your terms of sale (Incoterms) you may pay origin charges including:

ORC - Origin Receiving Charge
ODF - Origin Documentation Fees
THC - Terminal Handling Charges

If your shipment is moving inland from the port you may pay:

DDC - Destination Delivery Charges
IPI - Inland Point Intermodal or MLB - MiniLandBridge
IFC - Inland Fuel Surcharge

In addition, your container freight rate may depend on the actual commodity being shipped.

Of course for your full “landed cost” there are the myriad of other costs not directly associated with the ocean freight or container rate, some of which include:

Importer security Filing (ISF or 10+2)
Customs Brokerage
Duty & Taxes
Stripping and / or Transloading of Containers
Interim warehousing

and, and, and …


If you need more detail or clarification, we will be happy to work with you to setup a bid or RFP (Request For Proposal), or to audit or review your current rates and processes for possible improvement.

Whatever you do, plan for success! Poor planning can result in much headache and unnecessary expense. Great success will follow your good planning.


Contact us today at ray@paaa.com for more information.

Welcome to the New World of Spend Management (or the world you just noticed!)

As history and B-school case studies reveal, it is often only through adversity that companies recognize and then embrace systems and processes that make them "better" but were there all along. Take, for example, the somewhat esoteric term, "spend management" in the business community. This term is now on the lips of CFOs, controllers, CEOs, finance directors, etc., across the globe. But why now? Or, more important, why not earlier?

C'mon, let's face it, we rarely try to change things up when we are fat and happy, right? you know how the old addage goes, "If it ain't broke ..." The truth of the matter is, though, that spend management practices and initiatives have been around for decades. The glaring difference now is that companies seek to incorporate them into EVERY aspect of their business. A concept too long in coming (and, for many, too late).

What we find in the logistics spend management space (see, there ya go; every aspect of your business!), are companies working diligently to find resources to get lean but to get SMART as well. For example, and on the one hand, a medical device company in New Jersey works with PA & Associates to get "lean" in its logistics environment with a parcel carrier agreement negotiation project that saves the company hundreds of thousand of dollars. But then, on the other hand, the same company takes it a step further and gets "smart" by managing that spend area moving forward with better software and analytics, and, therefore, better practices in the environment. The same could be said of a PA client in Omaha, Nebraska that availed itself of PA's wildy successful domestic parcel negotiation project and followed it up by implementing savings projects for its international freight spend under PA's direction and counsel.

With spend management as a ubiquitous term in our present condition, one also finds unqualified peddlers preying on the hopeful CFO like vultures on a carcass. At the end of the day, however, working with a true solution-providing consultant is all about trust and value, two of the more hackneyed terms today. But, like beauty, you will know trust and value when you see it.

FedEx/UPS Resemble Candidates in an Election Year

What's going on?

The raging battle between FedEx and UPS looks more like mudslinging congressional candidates in a fierce battle for office than the top-tier corporations they claim to be.

First, take the allegations that surfaced late last week regarding UPS employees being coerced into letter-writing and lobbying against FedEx. UPS has already admitted that it paid for employees' time and supplies to write letter lobbying representatives that the present classification of FedEx as an airline creates unfair competition (UPS is classified as a trucking company and, thus, uses Teamsters labor resources). UPS claims the participation in the campaign to be voluntary.

Although alleged at this time, a number of reputable sources have been reporting that the UPS characterization of the activity is incorrect. Some (now former) UPS employees have been vocal about thier employer's heavy-handed tactics and their expectation that employees would follow lock-step.

Although aggressive and disturbing, UPS isn't the only one at fault. FedEx launched a website months back to put its own propaganda into the market. In the offices of PA & Associates, we received more than one e-mail from FedEx staff encouraging us to visit the site and side with the FedEx position that UPS is just another large corporation seeking federal government financial assistance.

As a normal course of our projects, I have sat in a number of UPS and FedEx presentations where representatives attempt be on their best behavior in hopes of landing the small package business of our clients. Underneath the calm demeanor and clenched teeth, each exhibits a seething dislike for the other; remembering the echoes of their Zig Ziglar training and sales manager's admonitions to only sell on the merits of their service and not to disparage their competitors. Unfortunately, most of them (on both sides) can't help themselves.

It remains to be seen as to the outcome of the FedEx issues and the discussions which are ongoing as to the status of their network. One thing you can be sure of; the propaganda machines are hard at work on both sides -- be it a "Purple" spin or a "Brown" spin.

Harness the Power of the WWW Community (for logo design!)

Remember the early days of the Web? When we referred to it as the World Wide Web (www)? We did that for a few reasons. First, it was brand new to most of us and we were just using the parlance that others created.

But second, and more substantially, it literally was a "world wide" web; doing something that had never before done...demolishing the geographic barriers between people, ideas and the collective talents of the entire world. With all of the creative uses, applications and Web 2.x features, the real power of the web lies in the leveraging of entire communities worldwide to produce a true market-driven outcome.

Take, for example, the simple and powerful idea of LogoTournament.com.

One of a number of these types of competitive sites (you may be familiar with the widely-advertised LendingTree -- where you apply for a home loan and lenders submit their offers), LogoTournament.com allows an individual or business post a creative brief and request for a logo design. Attached to this request is any amount over $250 the requesting party agrees to pay for the final logo.

Designers from all over the world submit their offerings and work through revisions based on feedback. All against the backdrop of a contest deadline. In the end, the client gets a number of creative directions to choose from and camera/web-ready artwork.

I recently used the site in the creation of a logo for our service methodology, 3-Part Logistics Spend Management (3PLSM for this article). Creating an account was straightforward and I had a pretty good idea of what our brand is and the use of the logo being requested, so moving through the forms used to create the creative brief were fairly easy. That said, you're not locking yourself into a direction once you submit, as you can return to the project and edit these ideas for the designers at any time.

LogoTournament encourages you to consider putting a higher "prize" (the amount you award to the winning design/designer), the idea being that a higher prize will attract the top-tier designers registered on the site. I'll leave this up to you. I will say that the project for 3PLSM carried a $250 prize and the submissions, both quantity and quality, were adequate for my use.

A great concept isn't enough these days. You need great tools to make the experience worthwhile. LogoTournament offers the latest Web 2.0 interfaces, allowing you to view designer submissions. sort and rank logos, make comments, and interract with the designer community.

If you've engaged a designer...or, worse yet, a marketing/advertising firm, to create a logo you probably paid more than $250 and had the creative energy of one designer. Offering a pittance of a fee for a varitable universe of designers is harnessing the true power of the world wide web and its community.