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New Changes in Rate Management for Ocean Freight

New Changes in Rate Management for Ocean Freight

How will you handle the new freight rate dynamics with the new ocean container line mergers and alliances?

If you thought ocean LCL and FCL ocean freight rates along with their multiples of surcharges was overwhelming, get ready for a tsunami wave to hit you. It is rumored more mergers are forthcoming.

Today, Japan’s three major ocean carriers - MOL, NYK Line and “K” Line - have agreed to merge their container operations in mid-2017 to form what would be the sixth largest line, continuing a recent trend of industry consolidation.

Last week the OCEAN Alliance became effective. The OCEAN Alliance is comprised of COSCO Shipping, CMA CGM, Evergreen Marine, and Orient Overseas Container Line Limited (OOCL). Agreement members are now permitted to share vessels; charter and exchange space on each other’s ships; and, enter into cooperative working arrangements in international trade lanes between the United States and ports in Asia, Northern Europe, the Mediterranean, the Middle East, Canada, Central America, and the Caribbean.

Ocean Container lines are reacting to over-capacity, falling revenues, and slow market growth. Unfortunately if exporters and importers are not fully prepared they will become victims (losing their negotiation power) in the accelerating ocean freight rate crisis.

Last month, it was the Hanjin Shipping bankruptcy. The Hanjin Bankruptcy, OCEAN alliance, and MOL, NYK Line and “K” Line Merger coming at the worst time: peak shipping season from Asia to US, and trans-Pacific service contract negotiations underway. Global shippers are faced with many uncertainties in this volatile environment.

The rate management question that shippers need to address immediately are:

  • Do you have a rate management system for your freight rates and contracts?
  • Do you have a central rate repository with global access and built-in security?
  • Does your system provide Total Cost Door to Door with visibility of all carrier routing options and delivery times?
  • How easy is it for you to upload new carrier rates and surcharges into your rate management system?
  • Does your freight rate management system provide you with historical data and freight invoice auditing?
  • Can you prepare and compare RFQ bids and procurement proposals within your rate management system?
  • Does you system handle multimodal and multi-leg routings - air, ocean, truck, rail, local drayage, demurrage?
  • Does your system have a built-in Dashboard, Reporting, Business Intelligence toolkit?

These are some of the questions global shippers should be asking about the capabilities of their freight rate management system.

Freightgate, the Innovation Leader in Logistics Cloud Solutions and mobile applications for logistics and global supply chain management, is offering global shippers a full list of questions to compare your rate management system, please email: sales1@freightgate.com

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