Graham Parker
October 1, 2024
Ocean freight rates have always been subject to change, but the degree of complexity and the pace of those changes have accelerated dramatically in recent years.
What once was a straightforward negotiation between shippers and carriers has transformed into a labyrinth of fluctuating base rates, surcharges, and ever-changing contract terms. This surge in complexity has strong implications for supply chains from procurement to delivery.
One of the primary drivers of this complexity is the increasing number of new surcharges. In the past, surcharges were limited and relatively easy to manage, such as fuel surcharges, terminal handling fees, and peak season surcharges. But today, the list seems to be endless. The industry has seen the introduction of new charges for everything from port congestion, piracy risk surcharge, and equipment imbalance to environmental compliance and strike surcharges.
For shippers, each new surcharge adds another layer of complexity to rate management. This means that the initial rate quoted by a carrier is rarely the true cost of moving a container.
Since these surcharges often fluctuate based on market conditions, what starts as an affordable rate can quickly spiral out of control if not closely monitored.
The increase in surcharges isn’t the only challenge. Contract amendments have also become far more frequent. Previously, shippers and carriers would lock in rates for the duration of a contract, providing stability and predictability. But, in today’s volatile market, many carriers request amendments several times throughout a contract period. These amendments often come with new rates, revised surcharges, and additional clauses, further complicating rate management.
Why TMS Can't Manage Rates
With the increase in ocean freight pricing complexity, traditional Transportation Management Systems (TMS) struggle to keep up. Many TMS platforms were built for a time when rates were simpler and changes less frequent. Today, these systems are often overwhelmed by the volume of rate data and the need to constantly update and adjust for new surcharges, contract amendments, and carrier-specific terms.
In a world where rates, surcharges, and other contract changes can change quickly, relying on outdated or static data often leads to financial losses. Furthermore, the lack of automation in many TMS systems means that logistics managers are forced to enter manually and track rate changes, increasing the risk of errors and missed opportunities.
Visibility and Agility
In this environment, shippers must have a clear view and understanding of the total rate they are paying, including all applicable surcharges. Without this knowledge, comparing different carrier options becomes impossible and shippers risk choosing a carrier that appears less expensive on the surface but ends up costing more due to hidden fees.
The key to navigating today’s complex ocean freight landscape is visibility and agility. Shippers need to be able to see and compare all rate components in real time and be prepared to pivot quickly in response to changes. Whether it’s switching carriers, renegotiating contracts, or adjusting shipping schedules, those who can’t stay on top of their rates risk falling behind their competitors.
About Ship Angel
Ship Angel is a cutting-edge rate management platform for BCO shippers, offering innovative solutions in rate management, amendment guard, invoice auditing, and sustainability reporting. Powered by AI, Ship Angel helps shippers manage rates efficiently, ensure contract accuracy, and optimize cost savings. With a commitment to transparency, Ship Angel works across industries to help companies avoid costly disruptions and stay ahead in a rapidly evolving global trade environment.
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