Bunker Prices (or BAF) the floating part of sea freight charges which represents oil prices.
Currency Adjustment Factor (CAF) is a fee placed on top of freighting charges to offset any losses from fluctuating exchange rates.
Service Changes: Whenever there are significant changes in services, capacities, alliances etc., this affects rates and opens opportunity to renegotiate.
Space: The bigger the imbalance between supply and demand for space, the bigger the discount or premium.
Weight: Some trades can be weight restricted prior to being space restricted.
Equipment: On each trade lane carriers know whether they have a deficit or surplus of each container type.
Cross Subsidies: Both customers and carriers can use cross subsidy tactics between trade lanes or container types to their advantage.
Risk: Your volatility of a trade will determine whether you pay a premium for a longer validity or get a discount for the promise of long term support.
Extension to detention free time can increase rates as the lines prefer their empties returned quickly.
Intended destination: In simple terms, the longer the journey, the higher the shipping rates.
Season: Seasonal cargo (eg fruit and vegetables) will have higher cargo rates during their seasons.
Fines and Fees: If there is any delay in reaching port due to over-crowding, there might be a fine imposed.
Terminal Fees: Fees at origin and destination known as terminal fees also affect freight rates.
Finding the balance between price and service isn’t easy when so many factors must be considered but investing the time to ensure you are sitting comfortably in a range that provides value to your business is key.
Smart supply chain professionals understand that true savings are in the innovative and creative ways they can successfully measure and improve their supply chain and not just in freight rates.