Time management, data accuracy, and the lack of visibility of performance are possibly three of the biggest challenges facing shipping today.According to Donald Davis, senior sales and customer care leader at New York Shipping Exchange (NYSHEX), and Kennith Sine, head of global procurement at online retailer Wayfair, a lot can be gained from transparent discussions between shippers and carriers to address some of these challenges.Carriers, they say, typically overbook because of the huge fall down they experience. Referencing as an example Hapag Lloyd, which carries an average of 240 000 TEUs per week but books closer to 400 000 TEUs, the lack of visibility between shipper and carrier has an impact.“From a shipper perspective it makes no sense that the carrier is overbooking, but this is not because they are being wild and irresponsible, but rather due to the high fall down that carriers experience. On some vessels it is as much as 30 to 50%,” explains Sine. “Carriers simply don’t know who is going to show up. Their objective is to maximise their assets, and that is why they overbook. Shippers who are transparent and are showing the carrier that they are booking and delivering are going to build a strong relationship and find themselves in a far better position. Highlighting to the carrier that you are not just booking to hold space, but are transparent and delivering an accurate number of TEUs, is going to assist you in becoming a shipper of choice.”According to Davis, it is of increasing importance for shippers to increase their desirability to their business partners. This includes shipping lines.By increasing reliability, he says, a lot can be achieved. “We need to take a different mindset and change how we have always done things. Instead of a one-size-fits-all approach or negotiating just one contract, these days it is more about creating solutions unique for your business.”Davis says pricing and contract duration are areas that have evolved in the past two years – largely because rates skyrocketed. “Because it’s more profitable for ocean carriers, they have been willing to enter into longer agreements. Prior to this, when rates and margins were low and cost played such a major role, most carriers were not inclined to sign long-term contracts.”He advises shippers to partition their business into different lanes or levels rather than just signing one option. “Depending on your business, look at what is the most applicable for spot rates, what needs short-term, long-term and then very long-term contracts that could even be over several years. This different mix approach is fast evolving and becoming a very viable option for shippers.”Sine explains that this approach delivers reliability to the carrier, while it speaks to shippers’ budgets and their appetite for risk. “You are able to really look at your business and find the solutions in terms of pricing and the length of the pricing model that best suits different parts of your business.”
