According to a recent publication by Xeneta, as budgeting and tendering season approaches, finance and procurement teams face mounting pressure to meet ambitious targets. However, without clear visibility into shared goals and open lines of communication, friction can arise—leading to unsatisfactory outcomes for all parties involved.
CFOs typically concentrate on three main areas:
The repercussions of procurement decisions on financial health can be profound. For example, Target faced significant challenges last year when port strikes and adverse weather led them to miss earnings expectations by about 20%, resulting in a dramatic drop of 21% in their share price following the announcement.
A common source of tension arises when a CFO prioritizes low freight rates that may prevent procurement from engaging carriers offering better service at slightly higher costs. This disconnect often complicates securing buy-in from finance without robust data backing procurement decisions.
A key challenge for procurement professionals lies in forecasting risks associated with budgets—such as potential port strikes—and understanding how these factors might influence freight rates far ahead of budget implementation dates.
Diving deeper into this issue during the webinar hosted by Xeneta revealed that nearly 70% of attendees identified unexpected rate increases or surcharges as major points of contention between finance and procurement teams. When freight rates surge unexpectedly or new fees are introduced, it not only leads to overspending but also diminishes control over logistics expenses.
The question remains: how do you justify fluctuating freight expenditures? The answer lies not just within fixed-rate contracts but through active risk management strategies akin to those used by CFOs regarding fuel or commodity hedging practices.
With tools like Xeneta’s platform you can:
CFOs’ aspirations toward avoiding surprises have become increasingly challenging since the onset of COVID-19; traditional fixed-rate contracts no longer suffice given fluctuating markets.Index-linked contracts offer an innovative solution where your shipping rates adjust accordingto real-time market trends—ensuring fair pricing while minimizing cargo roll risks during rate hikes.
By adopting index-linked agreements through platforms like Xeneta Indexing , both financeandprocurement departments gain predictability amidst uncertainty . This approach allows teams greater flexibility while still maintaining control over expenses .
“Xeneta aids us throughout our tender processes ensuring competitive pricing along with forward-looking forecasts across major lanes… Our community provides unparalleled insights into shifting markets.” – Hugo Grimston , Chief Financial Officer at Xeneta
To explore more about effective collaboration between CFOs & Procurement leaders , check out the full webinar titled “Explain It To Finance: Navigating Freight Decisions Under Scrutiny.” If you’re interested firsthand experience using our platform—including access features such as Index Simulator —don’t hesitate! Schedule your demo today!
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