Over 100 years ago, Italian economist and sociologist Vilfredo Pareto noticed a few recurring distribution patterns, which led him to discover that 80% of results come from 20% of causes. This phenomenon was called the Pareto Principle or the ’80/20 Rule’. The 80/20 distribution patterns are so universal, that they apply practically everywhere, for example:
- 80% of sales revenue comes from 20% of clients;
- 80% of traffic comes in 20% of the time;
- 80% of healthcare costs are generated by 20% of patients.
There could be slight variations in the percentage ratio, but there are always main factors which affect the result more than the others. Pareto discovery is extremely important, and the analysis of Pareto cause and effect can dramatically increase business productivity. You can read more about applying the Pareto principle in business here.
Pareto in Shipping
How to apply Pareto Principle in container shipping? Following the statistical analysis of the global trade volumes, it is easy to see that the same distribution pattern, discovered 100 years ago in Italy, works for the current container trade market. Basically, Vilfredo Pareto predicted container volume distribution pattern 60 years before the container was even invented!
The data is consistent:
- 80% of container volume is shipped from 20% of ports;
- 80% of container volume is shipped by 20% of shippers.
The data pattern applies to Russia, China, Brazil or any other country and remains similar in case import and export, FCL and LCL, sea and air.
In some cases, Pareto distribution chart can be even more dramatic. Let’s take a closer look at the busiest world trade route – Far East Asia imports to Europe. There are approximately 150 ports in the Far East and South East Asia. However, only 16 of them (roughly 10%) generate 80% of volume:
How to Leverage This Data?
Container shipping is a very complex business. There are thousands of possible port-port combinations and multiple container types. In addition, freight rates change frequently. There are also numerous surcharges applied on top of freight rate, and special premium/discount levels are negotiated for most of the customers. All of that results in millions of freight quotes full of special remarks and exceptions, which are very difficult to prepare, manage and trace, even with the most expensive custom-made software solutions.
At Quotiss, we tackle the main problem of the industry from a different angle: instead of programming the technology to handle enormous complexity in a relatively decent way, we dramatically simplify freight management process, reducing the number of parameters in the equation.
Quotiss proves that freight complexity can be reduced by 99%, following the data patterns discovered by Pareto 100 years ago.
Quotiss can generate 100% accurate quote in a few seconds. It’s user-friendly, tailored to the freight forwarding business and brings structure to the commercial process.
Contact us to schedule a demo – we will show you how to get your sales under control!