Startup Analytics of Price and Sеrvice in Shipping. Container Logistics in ‘Product’ terms.

This reading strips bare the price a merchant pays to ship a marine container. Starting with the shipping service in terms of product features. Plus technical details for the special cases. In a follow up article we’d lay out some of the anecdotal evidence in print and web, to put this into ‘high seas’ perspective.

Container Freight – Price and Service. (Unsplash for Visuals)

Main descriptors of a Shipping product. The Service.

  • Sailing frequency (for road hauliers and combined products as notice or response time)
  • Capacity – volumes to accommodate
  • Reliability – good when carriers keep schedules, have not that many blank sailings (miss, near misses)
  • Service levels – for contract customers – what is the performance on the contract, for spot and new, how do they prioritize. 
  • Documentation – channels, quality, requirements
  • Support and Ease of Doing Business – how is customer care set up? How much of it is a self–service and how much still needs to have a human input or rubber stamp. Is customer service via shared service centers, some local or third party representation. Can you call out  an issue, have some customized service when necessary.
  • Track record – claims handling, exceptions, flexibility. For instance when you want to reroute a shipment and need to rework documents. Or perhaps the volumes you had committed as a client do not materialize between seasons and do not add up for the contract rates.
  • Softer and less measurable metrics – dependability, resiliency, how do carriers react to and communicate disruptions, weather, strikes, congestions, ships lose steam or catch fire.

For a good detailed SLA scorecard and KPI concept frame you can consult Safety4Sea link, relaying Drewry analysis of a CargoSmart data.

Price. Container Freight Rates in a Nutshell.

Ocean carrier leg charges

  • Base Ocean Freight – fixed amount per standard container type to cover capacity (tonnage), network, overhead, baseline operations and associated admin
  • Currency and Fuel charges – a simplified hedge to arrive to consolidated/reporting currency, pass through fuel costs
  • Low Sulphur Fuel – an IMO, environmental concurrence requirement. Can be bundled with fuel, bunkers but essentially a compliance discriminant.
  • Specific Route-related charges – to recover channel taxes, congested ports, conflict zones, mandatory or extensive pilotage. The argument runs that carrier needs to add capacity to make up for the idling and there is a material cost uplift to go into product.

Equipment (container) charges

  • Special Equipment Surcharge – for non-standard container units, e.g. refrigerated, open top, open side, flat racks and platform, tank container, flexitank (for ingredient liquids), ventilated, garment fitted, bulk containers (a mould to carry chemicals, grain in bulk).  These are pricier to manufacture, operate and maintain. As with any variability, added to a homogenous and commoditized trade (a standard container between open ports), it carries fair amount of added costs, system noise and errors. A costly option.
  • Special Equipment Repositioning – the voyage of the empty special purpose container to get into loading position. This costs time, money and administration.
  • Merchant Haulage Fee – when merchant takes the precarriage (premises to loadport) or oncarraige (discharge port to premises). This is the cost plus (or the lost revenue) a carrier would make for the inland move. Follow up with the merchant haulage terms, be cautions with the free time and daily charges after that. These touch sales and transport documents and marking (see ICC’s Incoterms 2020 and the theme article).
  • Demurrage – a fee for a full container staying in discharge port, not picked up by receiver. This is applicable even if consignee is late for the documents, payment and terms or other formalities.
  • Detention – a charge for container staying longer at merchant premises (either discharging or loading). This one can also add cost for the waiting truck.

Cargo specific charges

  • Hazardous – IMO (UN), Hazmat, IMDG – all meaning dangerous goods. Note, for instance, cigarette lighters and car batteries are hazardous. Hazardous cargo required additional handling, inspections and documentation. Landside haulage vehicles should be compliant  (ADR).
  • Special handling of cargo – when the goods require, special lashing, securing, isolation, separation, documents and survey/inspection plus certificate. For instance, a car needs special securing, and if fuel is not drained and the battery is still in, it it a Hazmat (previous bullet)
  • Overweight or heavy lift surcharge – this relates to haulage too.
  • Oversized or Out of Gauge (OOG) – requires special container (see equipment charges above) – this affects haulage too and may involve additional requirements for permits, convoy, daytime only transitting, etc. limitations. Oversizesd cargo means lost slots on the ship so be prepared for the number.
  • Liquid – tank container.

Terminal charges – load, discharge and transhipment ports.

  • Terminal handling, Documentation, ISPS, Security, Inspection, Generating set (for refrigerated containers plugged-in). Separation stacks for Hazardous. Heavy duty cranes and forklifts for Overweight units

What to watch out for?

  • The Quote – does it have all items, or is it just for the base ocean freight with surcharges implied or referenced as ‘going rates, applicable at the time of …’
  • Situation with empty equipment – if there are no empty containers to stuff, rest of the elements don’t matter
  • Special equipment (in case). Do they offer, if yes, can they reposition, if so, what lead time and total price. Some carriers operate barebone services with no acceptance for special, regardless of equipment and cargo type. No point in charming your sales rep for a one off acceptance, waiver, etc. Special equipment means extra caution  on all sides – it costs more and requires special handling during the sea passage, in ports (cranes, forklifts), container freight station (CFS), warehouse ramp, trucks, etc.
  • Route – stay informed in general.
  • Have some general understanding for the port, country regulations at both ends of the voyage and in transshipment. Some trades would require advance import notifications (with the manifest), usually done by the forwarder, carrier or appointed agent. In any case better be safe or do the second checking than sorry.

Price and Service.

‘Service and price’ do not go hand in hand as we’d have them by intuition. Nornally, we would normally expect the better the more expensive. And here comes the nature of the branche to change plain, ind it is seldom normal, or other within ‘other things being equal’. When the markets squeeze tight, the charts get notably divergent. Services compromise, rates go up. That brings us to the industry basics (see the article on Container freight), supply / demand, liner conferencing and coopetition, frenemies, inefficiencies, … back to opaque.  

An exemplary primer for the Service to Prices raft was carried out in JOC.com (Journal of Commerce, Oct 2020) in an Oct’20 article:

Carrier schedule reliability falls to 2020 low of 56 percent

Carrier shedule raliability falls to 2020 low of 56 percent
by Greg Knowler, Senior Europe Editor, JOC.com | Oct 26, 2020

In summary:

This is about as much analytics you’d need to pick a service or change mind down the path. It’s part experience, part common sense, part caution and the occasional shopping for rates and new offerings. Although fundamentals hasn’t really changed since the Tea clippers set sail on the archetype of liner service, trading spices and silver bullions, the process part of the container shipping has been massively overhauled during the last decade into leaner, more meaningful and a much more convenient layer. We can shop, get a real-time quote, book, order transport documents, settle payments, and prepare customs formalities online. Carriers have their schedules on theweb – sailings, backfills, blanks, omissions, newbuilds phasing in and the shipment level of tracking – booking, bills of lading, container units, and then on the forwarding side – packed-in consolidation, groupage, LCL all underway.   

Next up, we’ll follow up with anecdotal analysis of real-life container pricing, inspired by BBC.com and other media.

Shipping crisis: I’m being quoted £10,000 for a £1,600 container’
BBC.com, By Vivienne Nunis | Business reporter, BBC News

Stay healthy and stay in touch!

systems@dintro.net | systems.dintro.net


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