The role of a broker is an interesting one in which we can experience both being a buyer and a seller.
The objective of a buyer is to buy bunkers at the best possible price.
There are 40 suppliers in Singapore. You can try to squeeze or reduce the price until the best possible price point is achieved (in other words, when it hits the rock bottom price!). Yes, by doing this you will get the best price today, but would you have the same amount of bargaining power and time available to achieve this every single time?
The next time, a larger premium might be added because the supplier suspects you may apply a similar tactic (i.e.that you will try squeeze them). Also, you may only have a shorter amount of time to spend negotiating because you have a heavy workload or additional commitments to book other vessels all around the world.
Becoming a great negotiator is not just about booking at the best possible price on any given day, but booking it efficiently and building good, lasting relationships with the supplier to ensure that you get good prices every time.
And of course, the objective of the seller (supplier/trader/broker side), is to make the best margin possible in the given market.
I believe the best possible outcome for both buyers and sellers is recurring business, rather than a 'one-off deal' or a 'big win'. Unfortunately not everyone thinks the same because it is possible with this approach that you won't make money on deals all of the time. Whilst I agree it is painful to lose money on a deal, if you look at the bigger picture over a longer period of time, it is often worth it.
When a price is given and booked, very rarely but sometimes, the supplier will come back with an extra cost that wasn't in their initial offer, or the prices changed due to the market fluctuation. If we see that it was 100% the supplier's fault, and the customer shouldn't be paying this price, we discuss, persevere and fight for it, and even if the supplier insists, we sometimes decide to not pass it on to the buyers.
So let's recap on some important tips on how to be a better negotiator:
1) Look at the big picture, not today's price
Sometimes, buyers get very frustrated that today's price is much higher than the last bunker. I remember starting this position when MGO was selling at 1000$ per ton. 2 years later, we were seeing prices at 300$ per ton.
The market rate always changes, and somedays we can buy cheaper and other times, its more expensive. Over the years, the bunker price will probably average out in the longer term.
The best approach is to focus on what we can do for this period of time, not get too bogged down with how today's price compares to last month's cheaper rate.
2) Focus on long term wins instead of quick or 'one-off' wins
As a buyer, it is easy to feel in control, and want the best price. But there is a tipping point where the supplier needs to make sufficient money to survive. In the past few years, we saw that suppliers in Singapore decreased from 80 to less than 40.
You may have noticed some suppliers quoting lower than the market price - this doesn't necessary mean that they will be able to survive in the long run. It almost became a trend to see which supplier could win high volumes right before they close to get rid of their stock. But such an approach is often short-lived or for a specific purpose like the one outlined above.
3) Sometimes, paying more saves time
The biggest expense incurred when operating the ship is the ship's cost itself. Sometimes paying more to have a more convenient delivery schedule saves money in the end. For example, even if the delivery by barge is higher, it may not affect the departure time. Or perhaps you have bought from a supplier who priced higher, but the service is more efficient and this saves cost and time in the longer term.
Hope this has been a helpful read!
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