SEA FREIGHT COST REDUCTION BY LONG TERM CONTACT

Abstract

The focus company in Bangkok is a freight forwarder offering a one-stop cargo export service by containership.  It has been losing customers to competitors who offer a lower price.  The company wondered whether switching its purchasing method from spot-buying to a long-term contract with an ocean liner firm would reduce the freight cost, enabling it to offer lower prices to its customers and thus retain them.  This study explores the advantages and disadvantages of signing a long-term contract, to understand the factors and conditions which enable a price reduction by this purchasing method.  The result of the research confirms the usefulness of a long term contract, and the company selects one form a liner firm.  This study is restricted to exports by containers from Bangkok to Shanghai.