GTM Best Practices

On October 17th all European – based conferences were disbanded. Deregulation of ocean shipping has finally come to pass and we are seeing early signs that beneficial cargo owners (BCOs) and logistics providers alike are scrambling to figure out how to manage transportation costing with a whole new level of rate volatility.

In the cozy world where carriers conferred on vessel capacity and agreed upon pricing levels for surcharges, there was a modicum of price stability. Competition among carriers was focused on relatively simple factors of base ocean freight rates and service levels, which made it easy for BCOs to manage rate agreements, understand their total costs and select a carrier.

That has all changed. In this past month, many are seeing divergences in Bunker, Terminal Handling, Canal and War Risk surcharges among carriers. While BCOs might be able to find generally lower rates, it is significantly harder to calculate a bottom-line cost. The process impacts are real and many are trying to define how:

• service contracts are negotiated and managed,
• alternative routes and rates for a shipment are calculated and compared to select a carrier service, and
• freight invoices are audited.

Clearly these new rate components and volatility will require new processes and information systems.

This rate volatility is hard for a BCO, but significantly more difficult for logistics providers that have more complexity in terms of routes, rates and contract structures. A screw-up when calculating a rate for a quote is potentially much more costly. And beyond margin, the extra effort will certainly affect how fast the sales department can respond to new market opportunities and prepare differentiated proposals.

Many will point to all-in rates as the answer, though a win-win doesn’t seem possible with the volatility in commodity prices. Who really has the stomach for prix fixe nowadays?

The answer is to look to history and the deregulation of ocean shipping in the United States. Leading companies addressed the challenge of confidential services contracts and highly volatile accessorials with TMS systems that can handle this complexity and allow companies to capture the benefit of deConferencing.

Here are some resources to help clarify how a Transportation Management system – focused on the complexities of seafreight – can help logistics providers and beneficial cargo owners.