How to use unit prices from shipment data to negotiate
Why benchmark?
Suppliers know the market price. Shipment data lets you know it too. Even a rough market range changes a negotiation from "is this a good price?" to "why is your price above the range?".
Step by step
- Filter to your exact product. Use the HS code, then read the descriptions and remove anything that's a different grade, size or type.
- Keep one unit. Only compare kilograms with kilograms, or pieces with pieces.
- Calculate unit price: value divided by quantity. Most CargoBills files include this column already.
- Remove outliers. Drop tiny shipments, free samples and obvious errors.
- Find the median and the middle range. In Excel, use =MEDIAN(), plus =QUARTILE(range,1) and =QUARTILE(range,3) for the middle 50%.
- Adjust for Incoterms. If records are CIF and your quote is FOB, take freight and insurance off the CIF prices before comparing.
- Check the trend. Compare the last three months with the same months last year. Seasonal products swing a lot.
An illustrative example
Say twelve recent shipments of fresh potatoes from one origin, after cleaning, give a median of $0.33 per kg and a middle range of $0.31 to $0.35 FOB. A quote of $0.38 FOB is above the market, unless the supplier offers something extra, such as better grading, faster shipment or longer credit. Now you know what to ask.
Limits to keep in mind
- Declared values can be lower than the real price, so treat the low end with caution.
- Quality, packing and payment terms all affect price and don't show up in the data.
- Small samples can mislead. Twelve shipments give a reasonable picture, two don't.
Read more about how accurate trade data is, or request a free sample to see prices for your product.