by Marcin Zarzecki, CEO of Quotiss
There are many good things one can say about container shipping lines, but they are also very well known for sending very complex and unstructured rate sheets. During my time in Maersk, where I spent over 10 years in sales, I was often struggling with the challenges of the pricing and quoting policies, despite Maersk being the most advanced carrier in this aspect.
One of the reasons why I started Quotiss 2 years ago was to simplify the carrier contract management. During this time we have collected a lot of data.
By now, I have seen thousands of freight contracts from various shipping lines, and I had an opportunity to analyze their structure very thoroughly. Conclusions are surprising and not too cheerful: this complexity comes from the internal inefficiencies and ‘broken’ processes.
– Our clients work with most of the major shipping lines – we studied the specific rate formats of all major ocean carriers;
– Our clients come from different parts of the world – we studied the differences in the rate format based on the specific country/office which prepared the rate sheet;
– Our clients work with shippers in different industries – we studied the differences in the NAC / special rates/exceptions format.
The general conclusion is that the lack of standard pricing and quoting tools in the shipping lines lead to significant waste in the process for all the industry players.
I will now illustrate the above conclusion with the detailed example: as I’m looking at the Asia – Europe rate sheet which was generated by one of the major shipping lines.
1. The structure
This rate sheet contains 15 000 port pairs, 109 000 lines with rates and surcharges, 545 000 unique rates for all equipment types. It is 500 000+ unique rates in a single rate sheet for just one trade/direction, with the validity of 2 weeks maximum.
2. The delivery method
This rate sheet has been emailed to a freight forwarder in Excel file as an attachment. Rates on Asia-Europe corridor change very often, sometimes even a couple of times per week. Let’s assume, the average is weekly. This means, that weekly a bulk load of rate sheets with half a million rates each is generated and sent via email to hundreds of freight forwarders.
That is 500 000 000 unique rates which are being recalculated and distributed, by one shipping line on one trade/direction.
3. Local specifics
Everyone in the industry knows that the shipping lines send their rate sheets in different formats, like .xls, .pdf, or just copy-paste to email body. But only a few people know that within the same carrier organization, different offices might use different templates and formats. Sometimes, even within the same office, salespeople send rates in a different format.
These format discrepancies within one company usually come from the big list of exceptions which are specific to the country/port.
There is a clear lack of the unified standard across the shipping lines, which comes from the lack of software which would be capable to cater for the giant list of local exceptions in an automated way.
The Saddest Part
The saddest part is that over 99% of content inside these rate sheets will never be used by anyone. Statistically, almost all of the cargo on the Asia – Europe trade route is generated by 20% of ports. Pareto Rule works for all trades in shipping – you can read more here.
There is a lot of waste in the process. Shipping lines realize this waste and work hard to improve the quoting process by trial and error, implementing various software solutions. But improving the ‘spreadsheeting’ process is like putting a lipstick on the beast – doesn’t give the desired result.
Is there any solution in sight? There is an obvious and logical one: for the real change to happen in container shipping, shipping lines have to simplify and unify their pricing structure across all offices/trades.
Once the pricing is simplified, the quoting can be dramatically improved. Read more about how we do it in Quotiss.
In my next post, I will dig deeper into the errors which we see in the carriers spreadsheets.