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Pareto Principle in Container Shipping

 

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Over 100 years ago Vilfredo Pareto, Italian economist and sociologist, noticed a few recurring distribution patterns and discovered that 80% of results come from 20% of causes. This phenomenon was called the Pareto Principle or the 80/20 Rule. For example:

  • 80% of sales revenue comes from 20% of clients
  • 80% of traffic comes in 20% of time
  • 80% of healthcare costs is 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 other. Pareto discovery is extremely important, and when applied properly, it can dramatically increase business productivity. You can read more about applying Pareto principle in business here.


Pareto in Shipping


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So how do we make use of Pareto Principle in container shipping? Following the statistical analysis, it is easy to see that the same distribution pattern that was discovered 100 years ago in Italy, also works for global 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 of both: import or export.

In some cases, Pareto distribution evidence can be even stronger. Let’s take a closer look at the busiest world trade –  Far East Asia imports to Europe. There are approximately 150 ports in Far East Asia. However, only 16 of them (roughly 10%) generate 80% of volume:

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How to Leverage This Data?


Container shipping business is very complex. There are thousands of 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 quotes full of special remarks and exceptions, which are very difficult to manage, even using the most expensive custom-made software solutions.

At Quotiss, we tackle the main problem of the industry from another side: 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 quotes in a few seconds. It’s easy to use, tailored to the freight forwarding business and brings structure to the commercial process. Quotiss is created by logistics professionals for logistics professionals.

Contact us to schedule a demowe will show you how to get your sales under control!

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