Month: September 2016

Quotiss - freight management software

Pricing Challenge in Container Shipping

Among other daily routine tasks, sales teams in both shipping lines and freight forwarding companies have to set up and manage the PRICING for the services they offer and send freight rate quotes to their customers. The industry is known for being very slow in quoting freight rates, and there are important reasons why.

What are the reasons for the ocean freight pricing to be so complicated and why it hasn’t been fixed yet?

 

The Cost of the Ocean Transport

 

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

Origin charges in Port ATransport from Port A to Port BDestination charges in Port B

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

  • Origin charges in Port A1 + Transport from Port A1 to transshipment Port A + Local charges in Port A
  • Transport from Port A to Port B
  • Local charges in Port BTransport from transshipment Port B to Port B1 + Destination charges in Port B1

To add more complexity to the list above, most of the cost components consist of sub-components. For instance, origin charges in Port A1 consists of:

  • THC (terminal handling charge),
  • EXP (export fee),
  • DOC (documentation fee), etc

Cost of the ocean transport from Port A to Port B can consist of:

  • BAS (basic freight)
  • ISPS (security charge),
  • ERS (“pirate” surcharge),
  • BAF (bunker surcharge),
  • LSS (low sulfur surcharge).

Ocean freight surcharges can be indicated in different currencies, depending on the trade lane or even port-port combination. Depending on the shipping line, the abbreviation used in the tariff can be different. For example, bunker surcharge can be called BAF, SBF, or BUC. The low sulfur surcharge can be named LSS, LSF, or ECA – depending on the carrier.

 

The Challenge for Freight Forwarders

 

Freight forwarders rarely quote just the ocean freight rate to their customers. Their offers often contain the cost for the inland haulage in both ends, adding even more complexity to the pricing of the shipment. Customs clearance, warehousing, special services – everything has to be calculated into costs for every single shipment.

Now, while the transportation costs are important, they are not the main driving factor for the pricing in the industry. Supply-demand is the king, which dictates the rates and impacts them very often, even too often.

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

Quotiss - sales automation tools

It’s not an easy task to maintain the order in the ocean freight pricing when transportation costs are so volatile and complex in their structure.

 

Complexity vs Simplicity

 

The end customer (importer or exporter) does not really care about all these factors. They just need to know what is the total price for transporting a container from Port A to Port B. They want the best freight quote, which is easy to understand, as soon as possible.

Shipping lines and freight forwarders face numerous troubles managing millions of ocean freight rates. They struggle to provide freight quotes quickly and accurately. The majority of forwarders still use MS Excel spreadsheets to manage rates.

E-mailing of the bulky MS Excel files back and forth is often the main communication channel between pricing and sales teams. Millions of MS Excel files are sent back and forth, which leads to the loss of revenues and increases the count of manual errors.

At Quotiss, we tackle the main problem of the industry from a different angle: instead of digitizing the enormous complexity of freight rates, we dramatically simplify the freight rate management process, reducing the number of variables in the equation.

Freight rate complexity can be reduced by 99%, following the data patterns discovered by Pareto 100 years ago.

Quotiss sales automation software generates 100% accurate quotes in seconds. The software is user-friendly and tailored to the freight forwarding business. It brings order and structure.

 

Would You Like a Quick Start with Quotiss?

 

Click here to register your company. We’ll activate your company’s profile and help with the initial settings and user onboarding. You can start uploading your freight ratesheets and quoting freight from Quotiss on the same day we sign the deal.

freight ratesheets

Quotiss Logistics Software Explained

Freight forwarding is a very complex business. There are hundreds of thousands of possible port pairs, multiple container types, millions of local exceptions. In addition, freight rates change frequently. There are also numerous surcharges applied on top of freight rates, and special premium/discount levels are negotiated for most of the customers. All of that results in millions of freight quotes full of special notes and exceptions, which are very difficult to prepare, manage, and keep track of without the right software in place.

At Quotiss, we tackle the main problem of the industry from a different angle: instead of digitizing the enormous complexity of freight rates, we dramatically simplify the freight rate management process, reducing the number of variables in the equation.

Freight rate complexity can be reduced by 99%, following the data patterns discovered by Pareto 100 years ago.

Quotiss sales automation software generates 100% accurate quotes in seconds. The software is user-friendly and tailored to the freight forwarding business. It brings order and structure.

 

How Does Quotiss Work?

 

Quotiss is a sales automation software for the freight forwarders of any size and specialty. In the more technical terms, Quotiss is a CPQ software, where CPQ stands for Configure – Price – Quote.

CPQ software helps sales teams to generate accurate sales quotes, gives visibility of the latest product and pricing information, provides a structure for the whole commercial process from A to Z. With the right CPQ software, sales teams can close more deals faster and make sure that their freight quotes are error-free.

 

Configure – Price – Quote

 

At the core of Quotiss, there is a powerful freight simplification engine, inspired by Pareto Rule and KISS Principle. Thanks to that, Quotiss removes 99% of complexity from the commercial process and structures the freight rate management in a smart and simple way.

The majority of logistics companies still use Excel spreadsheets to manage their freight rates. This leads to a lot of confusion, manual errors, and dramatic loss of revenues. Seeking solutions, companies end up hiring more sales support people or outsource such tasks to the service centers.

With Quotiss, carrier contract management is 99% simplified, thanks to the unique algorithm and quick freight tariff upload mechanism. This simplification allows to keep full control over freight rate management internally.

Once the freight pricing is streamlined, the freight quotes are automated. A salesperson can quote freight rates with 100% accuracy in less than a minute! With Quotiss, they can send a freight quote to one client or to a hundred clients in one click. It takes one click or 5 seconds, and everyone will receive a freight quote perfectly tailored to their needs – origin, destination, local charges, special notes and terms, margin levels are saved for each customer.

Quotiss also brings real-time sales performance analytics, enabling data-driven decision making to maximize the profit margins.

 

Would You Like a Quick Start with Quotiss?

 

Click here to register your company. We’ll activate your company’s profile and help with the initial settings and user onboarding. You can start uploading your freight ratesheets and quoting freight from Quotiss on the same day we sign the deal.

Freight ratesheets

KISS Principle in Freight Forwarding

KISS is the acronym that stands for simplicity. There are a couple of interpretations of what KISS acronym really means, for instance:

  • “Keep it short and simple”
  • “Keep it simple, stupid”
  • “Keep it simple and straightforward”

The Principle was formulated by Kelly Johnson in the middle of the 20th century. It is very relevant nowadays, especially in software design and freight forwarding.

As a user experience shows, it is easy to turn a potentially good software product into a “monstrous creature” by over-engineering and over-customizing the standard functionalities, UX, and UI.

 

KISS Principle in Freight Forwarding

 

The freight forwarding business is neither straightforward, nor simple.  Let’s make a quick calculation for the container shipping:

  • there are 500 container ports in the world;
  • there are 12 container types.

If major shipping lines and freight forwarders need to provide freight quotes for all possible ocean port-port-container combinations, how many quotes would they have to generate?

499 x 499 x 12 ~ 3.000.000

These 3 million quotes only cover the basic ocean freight. We shouldn’t forget about different commodities, special deals and various types of surcharges. Now add all the inland trucking locations! To sum up, there are billions of combinations! Now add another factor in – the freight rates change frequently. This means, that a new quote has to be generated, and the cycle will repeat again.

 

Complexity vs Simplicity

 

How does the industry manage this complexity? Freight forwarding companies choose either to implement highly complex integrated software business suit solutions or stick to outdated legacy software or maximize the value of the good old MS Excel. Actually, all the listed options are accompanied by millions of excel files sent back and forth.

The question is this: is it worth digitizing a highly inefficient process? 

At Quotiss, we tackle the main problem of the industry from a different angle: instead of digitizing the enormous complexity of freight rates, we dramatically simplify the freight rate management process, reducing the number of variables in the equation.

Freight rate complexity can be reduced by 99%, following the data patterns discovered by Pareto 100 years ago.

Quotiss sales automation software generates 100% accurate quotes in seconds. The software is user-friendly and tailored to the freight forwarding business. It brings order and structure.

 

Would You Like a Quick Start with Quotiss?

 

Click here to register your company. We’ll activate your company’s profile and help with the initial settings and user onboarding. You can start uploading your freight ratesheets and quoting freight from Quotiss on the same day we sign the deal.

Freight ratesheets

Pareto Principle in Freight Forwarding

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’s cause and effect can dramatically increase business productivity. You can read more about applying the Pareto principle in business here.

 

Pareto Rule in Freight Forwarding

 

How to apply the Pareto Principle to international logistics? 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 shipping market.

Let’s take a look at ocean freight in containers. The data is consistent. Basically, Vilfredo Pareto predicted the container volume distribution pattern 60 years before the container was even invented!

  • 80% of container volume is shipped from 20% of ports;
  • 80% of container volume is shipped by 20% of companies.

The data pattern applies to Russia, China, Brazil, and other countries. It remains similar in case import and export. You will find the same distribution patterns in FCL and LCL, in rail, road, sea and air freight.

In some cases, the 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 active ports in the Far East and Southeast Asia. However, only 16 of them (roughly 10%) generate 80% of volume:

ports

 

How to Leverage the 80/20 Rule?

 

Freight forwarding is a very complex business. There are hundreds of thousands of possible port pairs, multiple container types, millions of local exceptions. In addition, freight rates change frequently. There are also numerous surcharges applied on top of freight rates, and special premium/discount levels are negotiated for most of the customers. All of that results in millions of freight quotes full of special notes and exceptions, which are very difficult to prepare, manage, and keep track of without the right software in place.

At Quotiss, we tackle the main problem of the industry from a different angle: instead of digitizing the enormous complexity of freight rates, we dramatically simplify the freight rate management process, reducing the number of variables in the equation.

Freight rate complexity can be reduced by 99%, following the data patterns discovered by Pareto 100 years ago.

Quotiss sales automation software generates 100% accurate quotes in seconds. The software is user-friendly and tailored to the freight forwarding business. It brings order and structure.

 

Would You Like a Quick Start with Quotiss?

 

Click here to register your company. We’ll activate your company’s profile and help with the initial settings and user onboarding. You can start uploading your freight ratesheets and quoting freight from Quotiss on the same day we sign the deal.