Most freight forwarders struggle when managing carriers contracts. There is a clear lack of standardization in many aspects of the rate sheets that carriers send to freight forwarders. If we add to it the fact that these contracts are frequently changed, we can have a good idea of the complexity involved in quoting freight services. So, let’s talk about the main challenges freight forwarders have to face when it comes to getting rates from carriers.
The struggle when managing carriers contracts is very much real for freight forwarders. To be able to manage carriers rates and create quotes they have to deal with hundreds of messy spreadsheet files, with no structure and different formats. There are times when even within the same carrier, employees have different standards and send unlike formats of rate sheets.
It is very clear that there are many inefficiencies inside the shipping lines, as well as processes that need to be improved and simplified. It is actually costing them a lot of money, but it seems like most of them are not even aware of it since the disorder continues to be there. Some of the largest carriers such as Maersk, CMA CGM, Hapag-Lloyd, MSC and ONE are joining up to bring up to the market emerging technologies. This shows that the big ones are actually putting effort into keeping up with the digital era, but it is still too slow and isn’t enough.
Let’s picture for instance a rate sheet which can include 500 port combinations with 100.000 lines of rates and surcharges, and up to 10.000 unique rates. All in the same document and valid thru two weeks. Moreover, whenever the freight rates change, carriers send to freight forwarders a new rate sheet. Now think it happens at least once a week. That’s a lot of rate files, which by the way are not usually well organized, to manage for freight forwarders and it causes plenty of mistakes as well as delays in their quoting process.
Why do freight forwarders struggle when managing carriers contracts then?
There are five main challenges at least that we can ensure freight forwarders are facing when it comes to managing carriers contracts:
1. Inconsistent file formats:
A freight forwarder can receive carriers rate sheets in different file formats such as .xls, .pdf, as well as it can just be a copy-paste on an email. There are even some cases where salespeople working at the same company send contracts in different formats. This clearly shows that they don’t have a software to automate and standardize their rate management, which kind of explains why there are only 2 carriers providing instant quotes. They may not be aware of it, but this actually affects all of the other actors in the supply chain, like freight forwarders. Therefore it is key for shipping lines to digitize their operations as well in order to evolve this business.
2. Different port names:
In the freights industry, it is very common to find different names to refer to the same port, even within contracts from the same carrier. For example, Ningbo port can be found on a rate sheet as “Ningbo”, “Ningbo, CN”, “Ningbo, China”, “CNNGB”, or “Ningbo Port”. This causes some difficulties to freight forwarders because they have to spend more time and resources trying to standardize the name when managing carriers contracts and creating quotes. This is why it is crucial for them to count on a software able to unify all the port names, like Cargofive’s, which can help them save a lot of time and money.
3. Inconsistent freight surcharges:
Every freight rate includes the basic freight plus some surcharges that will depend mostly on the trade lane. The thing is, sometimes they are included in the freight rate, but some other times they are not. Plus, there are many different names for the same surcharge, which creates a lot of confusion and extra work. For instance, we can find all of these names for the exact same surcharge: Fuel adjustment factor (FAF), Bunker Adjustment Factor (BAF), Emergency Bunker Surcharge (EBS), Bunker Contribution (BUC), and Emergency Fuel Adjustment Factor (EFAF).
Of course, freight forwarders face the big challenge of unifying the names and calculating the whole freight rates to be able to quote their own services. It is also an aspect that costs them a lot of time and money. So, they need to count on a system just like Cargofive that allows them to consolidate surcharges under one name, calculate all the surcharges included in freight services, and add them to the basic ones to create a quote as fast as possible.
4. Disordered outport rates:
Another aspect where there’s no standardization at all is the outport rates. Freight forwarders can find in a contract that the outport rates are included, or else they are located in another tab of the file and must be added to the basic freight rate manually. It is something that does not even have a logical explanation, but it’s an issue that freight forwarders have to deal with. Therefore, it is vital for them to lean on a tool that also helps them automate all of the rates management to reduce an important amount of work, effort, and money, which again is part of Cargofive’s offer.
5. Difficult currency conversion:
The same contract can include rates in different currencies because it depends on the locations. When creating a quote, freight forwarders’ salespeople have to convert all rates currencies into one to deliver the information to their customers as clean and fast as possible. It is important then, to use a digital platform to automate the conversion process to optimize operations. In fact, another Cargofive’s feature is to show the quote’s rates in one consolidated currency, ready to send quickly to the client.
As you can see, all of these struggles are the reflect of antiquated processes that make it really hard to digitize the freight forwarding industry and evolve. Indeed, there’s an urgent need for simplification, standardization, and automation of carriers contracts. We already know digital transformation has been really slow in this business, but we need to insist on digitization if we really want to grow and stay alive in time.