Nick Coverdale from Agreefreight.com on where carriers are getting it wrong in their spot offerings.
Years ago I was asked how do container carriers calculate a freight rate. The answer is simple: they don’t, it’s based on what they can get and that’s what we’re seeing today but the frustration is how they present their version of the spot rates.
Most spot rates are valid for 15 days, which can mean they’re already invalid on the day of issue. On many routes from first being offered a rate to the vessel’s ETD, six days is needed to collect the empty container and complete all formalities to meet the sailing.
If there’s an increase on May 1, by way of an example, the first chance to accept the new rate and book is May 4. Let’s say you’re shipping Shanghai to Le Havre using Ocean Alliance, the only available vessel is the CMA CGM Concorde sailing May 11. If the customer can’t make that they need to think about another carrier or wait till the next Ocean Alliance sailing due on May 19 but there is no spot rate valid for that sailing so they need to search other carriers’ or forwarders’ websites and just keep searching all their websites until they find what they need or just wait till May 16 when the new spot rate is issued to fix a vessel. But by waiting so long the increasingly stressed shipper has now missed the sailing on the 19th and needs to get on the May 26 sailing.
In the current situation most shippers are fed up hearing about blockchain and visibility, they want someone to talk about first mile data that moves cargo, not freight indices that tell them last week’s rates, but tech that gives them an instant choice and gets their freight moving.
If carriers really want to operate in spot they have to offer a price with at least a 30-day validity and cease this misguided belief that delaying the issue of rates is always going to be to their benefit, when it’s not.
Airlines offer passenger fares on a spot system and through independent market places. Forwarders and carriers should do the same and make the very first step of the contract of carriage easier for their customers, not this continuous tug of war.
In this world of hype the very basics of shipping are being forgotten. Since the Phoenicians first traded across the Mediterranean they offered a shipper a rate, a vessel and proposed dates – that has not changed and never will, yet it seems to have been ignored of late.