Does your annual ocean bid process sufficiently factor in risk?

Everybody is talking about risks in ocean transport operations and procurement. In this Logistics Executive Briefing, senior consultants within our global ocean freight procurement team, share insights into the practical steps shippers can take to identify, manage and mitigate risk this tender season.

When we talk of risk in ocean transport, what exactly do we mean?

A good starting point is to flag a few examples or scenarios, which will no doubt resonate with many shippers:

You secure base rate reductions in your bid, but carriers add new regulatory or other surcharges later. Fuel surcharges, detention and demurrage costs are not controlled and add costs. Numerous cancelled sailings delay your shipments. Your capacity allocation is reduced by the carrier. Or your contracts with providers do not address or prevent problems faced after the bid is complete. You discover, post-event that your competitors secured deeper rate reductions than you achieved. Post-bid contract rates are materially lower or higher than expected before the bid starts, making your senior management question your bid planning. The days of low or no risks in transport execution and in transport contracts are long gone.

As the container shipping market weakens in the second half of 2025 and beyond, in Drewry’s view, carriers are likely to lower service levels (and capacity) and compensate for softer base freight rates by raising surcharges. The carrier practice of frequently cancelling sailings – replacing the previous norm of weekly sailings – is not just deemed acceptable, it should now be expected.

Addressing risks in planning and in monitoring

Shippers/Beneficial Cargo Owners are getting more sophisticated in the use of automated bid tools and in understanding how to anticipate or respond to operational disruptions – a lesson from the Covid disruptions.

But some of the latest best practices are about factoring risk into the ocean procurement process, both at the planning stage and as part of the ongoing monitoring of risk areas and carrier performance.

What do we mean?

Start with a risk audit, encompassing the main areas of geopolitical (e.g. Red Sea situation), regulatory (e.g. USTR fees on Chinese ships), macroeconomic, infrastructure, transport, assets, logistics risks. Nowadays, a review of alternative sourcing locations may need to be included in this, given the more restrictive trade policies.

Then plan and prepare for risks. It does not have to be difficult, in Drewry’s experience:

Look at contingency plans when there are any. Or review and tighten your contracts with providers, to either ensure that those risks are avoided or that the costs are absorbed by the providers. Plan your bid strategy and consider the “best provider line-up” – including those carriers who will help you overcome or correct some of the risks. Manage your carriers better using Key Performance Indicators. Find out the schedule reliability track records and/or the actual transit times of providers and build in the right “buffer times” in your internal lead times. Obtain forecasts of spot rates and contract rates and decide the best allocation for your company. Consider the price vs service trade-offs and benchmark your company against peers of the same size.

In a weakening market, however, you may not want to have rates much lower than your peers if the consequence of this is below-par service levels. (Drewry operates a Benchmarking Club of 100+ international companies – exclusively for shippers – enabling member companies to confidentially compare their rates, surcharges, transit times, free times, payment terms and other metrics. The unique insights afforded to members help them move their cargo smoothly at a competitive and – in the next bid season – lower cost, but also allows multi-layered peer-to-peer comparisons to be made.)

Targeting risk: Drewry’s risk management framework

The schema below is an overview of the risk management cycle in ocean procurement. This informs the custom solutions we deliver to international shippers with broad representation of industry sectors, transportation needs and volumes.

The framework is practical and very much action-orientated, defined by clear steps, supported by check-lists and due diligence reviews, which Drewry can support, should procurement and logistics teams need to tap our pooled knowledge and best practices. Source: Drewry