Shippers have been looking for needed stability in a rocky market by contracting with freight forwarders instead of playing the spot market, according to Brandon Fried, executive director of the Airforwarders Association.
“Members have reported that in an effort to lock in lower rates brought about by the economic downturn, some customers are inquiring about long-term contracts,” he told American Shipper
A handful of shippers in the market today have been bidding out contracts to forwarders, looking to balance transit times and cost. This can be seen as an increasing ocean-container approach to shipping, but it doesn’t seem like a trend that will light the industry on fire, instead it’s simply a reaction from a handful of shippers who want stability in pricing.
With some shippers, this seems to be more than just a reaction to the downturn. Some companies imply they are moving away from the spot market altogether, using contracts as a baseline instead of a reaction to a down market. These shippers would only play the spot market for emergency shipments and would be, in effect, changing the way they book air freight.
For the shippers who use contracts as a way for stability, Fried added that this is neither a new way of business nor anything out of the ordinary. During the last downturn, shippers also started contacting forwarders to lock in services. Many shippers will even contact their forwarders to renegotiate pricing when contracted shipments exceed their normal weight.
“This is usually done to capture reduced pricing achieved through higher weight categories, which may not be addressed within the existing contract,” he said. - Jon Ross