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Quoting rates is a balancing act

Quoting rates is a balancing act

Finishing up with his team Jeff realised he was flying dark again. He had clients asking for quotes and the shipping rates were not available. He was going to have to make a call and hedge it again. It was a good thing there were so many different rates and fees that applied otherwise making a profit would be impossible.

Just then Rob, the financial controller, walked in looking as stern as always.

“Jeff, I have been reviewing our margins and…”

Straightening his tie, Jeff headed around the desk to cut Rob off from sitting down.

“Rob, I know. Quoting is a balancing act. We must be competitive and that means I must negotiate on rates. Sometimes we win and other times, well, we do well to break even.”

“Look at the fees we get, we still make a profit overall, and if that means I can close the large volumes we need then so be it.”

Staring back at Jeff, Rob doesn’t back down. “Jeff, that is true. But what are you doing to increase the margins? Our margins are declining. What you are doing is painful. This company won’t survive unless you find ways for us to be more competitive and that means charging higher margins.”

“Come on Rob, you know as well as I do that this is a competitive industry and we are bidding against other companies. There is very little loyalty out there. We are trying to upsell added value services but Carol’s team (operations) just can’t keep up with all the reporting. If you can get her more resources, we would really be able to push the added value services.”

“Stop deflecting Jeff, Carol and I are already talking about resourcing, and whilst margins are tight we can’t afford to hire more people. What’s Steve going to tell the board next month? That we can’t turn this around?”

Closing the door behind Rob, Jeff’s attention is immediately drawn back to the day’s fires. With a sigh, he starts returning the calls he had missed this morning.

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The recurring nature of this issue is a symptom of a deeper issue


The forwarder's dilemma

Analysis of the Quoting rates is a balancing act issue

Jeff is having to dance a careful line. As head of sales his job is to win business. But for Jeff the role is getting harder and harder. In the competitive forwarding market, Jeff is fighting against other forwarders who were cutting margins to win business. That means for Jeff the practicalities of day-to-day sales I of customers making decisions on who to go with based on the smallest of differences in quotes. Whilst all this competitive pressure exist Jeff is being constantly being reminded that the profit in the jobs being won is inadequate for the business’s needs. Jeff is stuck with people looking to him to perform miracles.

Many companies address this problem by changing their product mix, bringing out new products to avoid being caught is a commodity pricing war. It’s not so easy for forwarders and many are caught in the reality of their serviced being one where there are low barriers to customers moving to another forwarder. In this scenario, the forwarder who is offering the best rates usually wins the business.

Steve, the CEO, wants Jeff to push added value services. The idea is great in principal but for Jeff it’s a constant battle as the competitors quickly match any value add offering. The challenge for Jeff is to find a way to view forwarding services that adds value for customers yet competitors are unable or unwilling to copy it. That challenge is not easy.

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