Chainalytics LLC and Drewry Shipping Consultants Ltd., two global supply chain management consultancies, said today they have launched a rate procurement operation for small to mid-size ocean shippers to obtain favorable contract pricing that is typically reserved for larger users.
In addition, the initiative will give smaller entities access to Drewry's market intelligence and carrier benchmarking services, which will aid in deciding which carrier and pricing options to choose, the companies said.
The operation, known as the Ocean Buying Group (OBG), will aggregate volumes from multiple beneficial cargo owners to build large enough aggregate traffic to qualify for lower carrier rates. OBG will function as a shippers' association, and thus does not have to be licensed by the U.S. Federal Maritime Commission (FMC) as a non-vessel operating common carrier (NVOCC), under which the entity negotiates rates with a carrier and books the shipment under its own contract of carriage, known as a bill of lading.
Philip Damas, head of Drewry's logistics practice, said in a statement that the program is unique in that it offers pricing that's cheaper, stable, and transparent, as well as the opportunity for BCO users to share intelligence for better decision-making. These features are sorely needed for a "segment of the market that often suffers pricing volatility and opaque service levels," Damas said.
OBG operates as a not-for-profit entity and offers its services for free; it will make its money through volume incentives established by the container lines. OBG's users are not contractually committed to the programs, and can continue to use their existing NVOCC and carrier arrangements. For many BCOs, OBG would be viewed as a supplement to their existing relationships, according to John Westwood, senior manager of Chainalytics' transportation practice.
Unlike an NVOCC, which negotiates rates on behalf of its customers, OBG will present its users with a variety of options to choose from. By leveraging Drewry's decision-making tools, it is hoped that BCOs will be armed with the information they need to enhance their buying decisions, according to Chainalytics and U.K.-based Drewry.
Chainalytics is aiming for BCOs that typically tender 5,000 twenty-foot equivalent unit (TEU) boxes over the life of the contract period, which could be one year or sometimes less, Westwood said. On the eastbound trans-Pacific container trades where Chainalytics conducts most of its ocean freight activity, a smaller BCO could save about 10 percent compared to what it would normally pay if it put their volumes out for bid itself, Westwood said.
The real benefit for OBG customers will be sparing them the time and expense of managing multiple bids in house, or in hiring a company like Chainalytics directly, at a significant cost, to build and execute the bids, Westwood said.
"It would take shippers a lot of work" to perform the services in house that OBG would do for them, he said.