The Situation
A New Zealand importer and distributor with a national supply chain network was approaching a significant freight procurement decision. Three freight providers had been shortlisted through a formal RFP process covering the Italy–New Zealand trade lane. While the headline pricing appeared competitive, the company's CFO wanted an independent assessment before progressing to final negotiations.
The objective was not simply to identify the lowest freight rate. It was to understand the commercial, operational, and contractual implications of each proposal — and to ensure the business was making a fully informed decision.
HSCM Solutions was engaged shortly before provider presentations to provide an independent commercial review and decision-support framework.
The Challenge
At first glance, the pricing differences between providers appeared relatively small. But freight tenders are rarely won or lost on headline rates alone.
Important questions remained unanswered:
- How would carrier surcharges be managed over the life of the agreement?
- Were providers quoting on a genuinely like-for-like basis?
- What capacity commitments existed during peak periods?
- How would detention exposure be managed?
- Were transit times and routing assumptions comparable?
- Did the proposed contract structures adequately protect the business?
The risk was not selecting the wrong freight provider. The risk was signing a contract without fully understanding the commercial mechanisms sitting behind the rates.
What HSCM Solutions Did
The review went well beyond a traditional rate comparison. Each proposal was analysed on a component-by-component basis, including:
- Origin charges
- International freight
- Destination charges
- Carrier surcharge structures
- Contract terms and capacity commitments
- Transit time and routing assumptions
- Operational processes and governance mechanisms
The engagement also included commercial benchmarking against the incumbent provider, risk assessment and mitigation planning, development of provider presentation scorecards, evaluation criteria for final negotiations, contract structure recommendations, and a decision-support framework for management.
Key Findings
Several important commercial issues were identified during the review.
Surcharge Transparency
Different providers treated carrier surcharges in different ways. Without appropriate governance, reductions in carrier costs may not automatically flow through to the customer — creating a risk of hidden margin erosion over time.
Detention Exposure
One proposal did not clearly define detention charges, creating the potential for uncapped costs if containers were not returned within agreed timeframes.
Routing Assumptions
Some freight providers were quoting fundamentally different routing solutions despite appearing similar on paper. The review identified differences in shipping line selection, port routing strategies, inland transport assumptions, and overall service models. In several cases, apparent cost differences were driven by different carrier networks and routing approaches rather than genuine commercial advantages — meaning headline pricing comparisons were not always comparing equivalent services.
Contract Structure
The review identified opportunities to improve rate review mechanisms, surcharge governance, commercial flexibility, and long-term provider accountability.
Commercial Opportunity
The review identified multiple opportunities to improve commercial outcomes through freight procurement, surcharge governance, contract structure, and operational planning. The extent of these benefits would depend on final negotiations and implementation.
The Outcome
The review provided management with a structured framework for provider evaluation rather than a simple price comparison.
The process reinforced one of the key conclusions of the review: the final decision was never going to be determined by headline freight rates alone.
Commercial structure, surcharge governance, operational capability, carrier strategy, and contract design ultimately became more important than relatively small differences in pricing.
Why This Matters
Many freight procurement decisions focus primarily on rates. In practice, surcharge treatment, contract design, detention exposure, carrier capacity, transit performance, and governance mechanisms often have a greater long-term impact on freight cost than small differences in the rate card itself.
An independent review helps identify these risks before contracts are signed — not after.