Pricing Challenge in Container Shipping

Among other daily routine tasks, shipping lines and freight forwarders have to set up and manage pricing for their services. They also prepare and send offers to their customers. The industry is known for being quite complicated and slow in this respect, but there are important reasons why.

Transportation Costs

Let’s take a look at this aspect from a shipping line perspective, by breaking down the costs structure. In the simple linear example, the total cost of transporting the container from Port A to Port B will consist of:

  • Local charges in Port A + Transport from Port A to Port B + Local charges in Port B

But there are often transhipments on the way, which alter the costs structure:

  • Local charges in Port A1 + Transport from Port A1 to transhipment Port A + Local charges in Port A
  • Transport from Port A to Port B
  • Local charges in Port B + Transport from transhipment Port B to Port B1 + Local charges in Port B1

When we add inland haulage to both ends of the chain, pricing structure becomes even more complex:

  • Transport from Point A2 to Port A1
  • Local charges in Port A1 + Transport from Port A1 to transhipment Port A + Local charges in Port A
  • Transport from Port A to Port B
  • Local charges in Port B + Transport from transhipment Port B to Port B1 + Local charges in Port B1
  • Transport from Port B1 to Point B2

To add even more complexity to the above, most of the cost components consist of sub-components. For instance, local charges in Port A1 can consist of:

  • THC (terminal handling charge),
  • EXP (export fee),
  • ODF (documentation fee).

Cost of ocean transportation from Port A to Port B can consist of:

  • BAS (basic freight),
  • SER (security charge),
  • ERS (“pirates surcharge”),
  • BAF (bunker surcharge),
  • LSS (low sulphur surcharge).

Shipping surcharges can be indicated in different currencies, depending on the trade lane or even port-port combination.

Rate Volatility

While the transportation costs are important, they do not represent the main driving factor for the pricing in container shipping industry. Supply-Demand is the king, which dictates the rates and adjusts them very often, even too often.

Shanghai Freight Index is the aggregated measurement of the ocean freight rates. It perfectly illustrates their volatility:

The busiest trade routes, such as import from Far East Asia to Europe and America, witness spot rates revisions as often as several times a week.

Complexity Management

It’s not an easy task to handle the ocean freight pricing challenge when transportation costs consist of up to 25 various charges and shipping companies face enormous rates volatility – with up to 50 rate revisions per year.

Nevertheless, for any typical importer or exporter the above factors are not that important. They just need to know what is the TOTAL PRICE for transporting container from Port A to Port B. They would like to receive a quote in their preferred currency, as soon as possible.

Shipping companies face troubles managing thousands of ocean freight rates and struggle to provide sales quotes quickly and accurately. Majority of them still use excel spreadsheets to manage rates and trade guidelines.
E-mailing of the Excel files back and forth is often the main communication channel between pricing and sales teams. This leads to the loss of revenues and increases the count of manual errors. It makes it difficult to keep customer contract rates accurate and up to date. Companies are seeking solutions. They usually end up hiring more people or outsourcing the job to service centers.

Simplicity Management

Quotiss is a new age logistics software, which offers revolutionary approach to freight management: first Quotiss dramatically simplifies the input of freight rates into the system, and this allows to fully automate freight quotes. Freight quotes prepared by Quotiss are 100% accurate, and it literally takes 5 seconds to generate and send a quote to client.

We prove that freight complexity can be reduced by 99%, following the 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 demo – we will show you how to get your sales under control!