Drewry: Shippers must go digital in wake of consolidation
- Beneficial cargo owners (BCOs) — in the midst of consolidation, changes in supplier behavior and new tender technology — should incorporate benchmarking and big data to determine the best service at the right rate.
- By July of 2018, there will be just eight container ships on the Asia-North Europe route, Drewry reports. However, this will not make the contracting process any less complex.
- Further, annual contracts for the Asia-North Europe and Asia-US West Coast routes are experiencing freight rate increases of nearly 50%, though from an unsustainably low base due to over-capacity.
Methods that benefited shippers in an over-saturated shipping market are now out of date.
In the current market, freight quotations are comprised of three variables: pre-carriage fees, carriage fees and on-carriage fees. Thanks to this dynamic, rates may be moving away from private negotiating, as some industry leaders push for transparency and more fair pricing. As a result, new platforms are emerging, such as Agree Freight, which can reduce booking time by up to 15%, cutting out the middleman and the hassle of haggling over prices.
The reality is that the ocean cargo shipping market is growing too complex for the old bargaining methods to remain useful. In an industry undergoing such rapid change, there's simply no way to keep track of constantly fluctuating prices and space when lines are consolidating or even just establishing memorandums of understanding or strategic cooperation agreements, not only between shipping lines, but also between carriers and international terminals.
Transitioning to a digital booking model will simplify the process, tracking the details that for now, must be juggled to guess at the "best" rate.
- Drewry Drewry warns BCOs to adapt their contract strategy
- Supply Chain Dive What shippers should know about the state of ocean rates
- Supply Chain Dive How changes in the ocean cargo industry affect shippers
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