Prices in the shipping industry fluctuate wildly, as does the availability of containers. Rates have spiked three or four times and are likely to remain elevated as global demand for goods continues to outstrip available capacity. For this, most have started using dynamic pricing to increase visibility. So how can freight forwarders thrive and grow in this environment? 

 

Freight forwarders can choose between several pricing systems. This can be quite a challenge considering the benefits of both alternatives, spot and contracted rates. While the former can provide information in real-time, the latter can have great returns if traded correctly.

Currently, nearly 75% of the top 11 ocean carriers offer instant rates on their websites, and 45% offer eBooking. This results in around 15% of the industry opting for spot rates.

 

What pricing systems currently exist?

  • Contracted rates

These are freight rates negotiated directly with the carrier, depending on the volumes required. Generally, the higher the volume, the better the rates. Contracted rates are usually for an agreed period and provide more cost stability. Also, it depends on the close relationship with the shipping company and the processes they carry out there, which will define the speed and simplicity of the process.

If we focus specifically on the process that a freight forwarder must carry, from negotiating with the shipping company to delivering a quote to his client, we’ll find that it’s complex and dispersed. The formats to share between different parties, analyze, and order these rates are varied and not standardized. 

 

  • Spot Rates

A spot rate is a one-off rate earned for transporting a shipment in real-time. Generally valid for a single shipment and often restricted to a specific vessel or date range. These rates tend to be unpredictable as they fluctuate depending on the market conditions. For example, some factors that affect its variation are peak shipping seasons and surcharges, blank sailing, seasonal fluctuations, political landscape, global holidays, oil prices, and general fundamentals of supply and demand.

Circumstances like these make it challenging to ensure cargo is shipped promptly. Plus, they may be the first to be eliminated by carriers depending on market conditions at the time of shipment. 

Its most significant is that they secure space on the ship and guarantee shipment. Also, freight forwarders can access it directly from the websites of each shipping company, without the need to download or manage Excel documents, PDFs, etc. However, just like contracted rates, spot rates are scattered, and it’s necessary to access website by website to find the fare that best suits the client’s requirements.

 

How to optimize the pricing process with both rates? 

As we mentioned, both formats are complex, and the rates are spread in different places, thus slowing down the pricing process and complicating the tasks of freight forwarders. However, several companies are already developing initiatives to try and solve it.

At Cargofive, we offer an agile, dynamic and centralized digital solution that allows freight forwarders to access the information they need in one place. With this solution, different European freight forwarders have digitized their tariffs while accessing spot rates from different shipping companies on a single platform.

Specifically, it is proven that the procurement team saves about 120 hours per month since all they have to do is upload the contracted rates into the system. In addition, the pricing team saves more than 90% of the average time spent on generating quotes. Time they can invest in improving information quality and avoiding costly errors. This is due to the optimization of time achieved with integrations via API, which allows access to the necessary information in real-time.

Several freight forwarders from countries like Spain, Italy, and Portugal have added Cargofive to their process to stay competitive in the industry and increase rate management visibility in such a changing market. What are you waiting for to join too?