Procurement managers pay on average 15-20% too much on shipping costs – simply because they negotiate Incoterms incorrectly.
The €50,000 Mistake You're Probably Making
Typical purchase order:
Supplier quote: €100 per unit, DDP (Delivered Duty Paid)
You think: 'Great, price includes shipping. Easy.'
What you don't know:
- Supplier added 15% markup on freight
- You could negotiate better freight rates
- You're paying for convenience, not efficiency
On €5M volume with 10% freight component: €75,000 overpaid on shipping.
The Incoterms Impact
Scenario: Importing from Asia
DDP (Delivered Duty Paid):
- Supplier handles everything
- You pay: €100/unit
- Freight portion: €15/unit (supplier's cost: €10, markup: €5)
EXW (Ex Works):
- You arrange freight
- You pay: €85/unit + €10 freight = €95/unit
- Savings: €5/unit (5%)
On 10,000 units: €50,000 saved
The Hidden Costs of 'Convenience Incoterms'
Incoterms where supplier controls logistics:
- DDP (Delivered Duty Paid)
- DAP (Delivered at Place)
- CIF (Cost, Insurance, Freight)
Supplier markups:
- Freight: +10-20%
- Insurance: +15-25%
- Customs: +10-15%
Why? Supplier uses their freight forwarder, not the best rate.
The Smart Incoterm Strategy
For Regular Shipments (>10 per year):
Use: FCA (Free Carrier) or FOB (Free on Board)
Why:
- You control freight
- You negotiate volume rates with forwarder
- No supplier markup
- Better tracking
Savings: 3-7% on freight
For One-Off Shipments:
Use: DDP
Why:
- Administrative effort not worth savings
- Supplier handles customs complexity
The Calculation
€5M procurement volume:
- 30% international suppliers
- 10% freight component
- DDP vs. FCA savings: 4%
Math:
- €5M × 30% = €1.5M international
- €1.5M × 10% = €150,000 freight
- €150,000 × 4% = €6,000 annual savings
Just from negotiating smarter Incoterms.
The Platform Solution
Manual Incoterm management:
- You need to know all terms
- Calculate manually
- Track different forwarders
- Compare rates yourself
Automated platform:
- Suggests optimal Incoterm
- Calculates total landed cost
- Compares supplier quote vs. your freight rates
- Highlights overcharges
Common Mistakes
Mistake 1: Always using DDP → Overpaying 5-15% on freight
Mistake 2: Switching Incoterms mid-contract → Supplier confusion, price increases
Mistake 3: Not considering total landed cost → Cheap unit price, expensive total cost
Mistake 4: No freight forwarder relationship → No volume discounts, no leverage
The One Simple Trick
Before accepting DDP quotes:
- Ask supplier for EXW/FCA price
- Get your freight forwarder quote
- Compare total landed cost
- Choose cheaper option
This takes 15 minutes and saves €5,000-50,000/year.
Call to Action
Review your top 10 international suppliers:
- Check what Incoterms you're using
- Calculate if FCA/FOB would be cheaper
- Renegotiate if savings > €5,000/year
Chase Prime AI automatically calculates optimal Incoterms for every quote – so you never overpay on freight again.