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02/14/2018

Smart shopping on the ocean freight market

The number of imports from Asia to Europe is constantly growing – but the number of shipping companies is in continuous decline. The market is tense and requires new concepts. A purchasing network cuts ocean freight costs and ensures long-term planning security.

With regard to importing from Asia to Europe, the situation on the ocean freight market has been tense for years. Ocean freight costs which change on a weekly basis are part and parcel of day-to-day business. Continuously diminishing rates of return in the face of increasing cost pressure is still putting pressure on many large shipping companies – leading to them declining in number and drastically aggravating the uncertain market climate as ocean freight rates continue to rise. For companies, this situation translates into a high planning effort in logistics and supply chain management, as well as a lack of cost stability. New concepts are required in this regard, as this market situation is not expected to improve in the short term.

“The requirements with respect to purchasing ocean freight services are also changing as part of the ongoing focus on what will in the future be only nine well-known shipping companies in the Asia to Europe transport route, which are organised into three alliances even today,” explains Marc Baeuerle, Managing Director of Corporate Service GmbH and a cooperation partner of Kerkhoff Indirect Procurement GmbH. From an expert’s point of view, carefully examining ocean freight purchasing concepts and being open to new logistics concepts is good advice.

“Shipping companies pool their activities, so it also makes sense to pool volumes across companies and to negotiate them with and buy them directly from the shipping companies,” adds Inga Schurba, a Logistics Purchasing Expert at Kerkhoff. The overall objective of this pooling and optimisation of requirements is to negotiate purchasing conditions which an individual company would not usually be able to obtain. This purchasing model also ensures lower transaction costs by reducing the negotiations to just one between the shipping company and cooperation partner and bringing the advantage of absolute cost transparency. This is because negotiated prices and conditions are passed on 1:1.

Partners are remunerated based on the savings made or based on a fixed rate. Flexible additional services such as transport from and to the port can be individually agreed upon, and therefore tailor-made logistics concepts can be supplied from a single source. For the combined companies, this business model not only means potential savings of 20 to 25%, but also 12-month planning security due to long-term agreements. Because products have to reliably arrive on the customer’s premises or at the point of sale in ever shorter times without rising costs or deteriorating quality, the advantage for the companies also lies in the increased shipping reliability – ensured due to attractive and, above all else, transparent contracts with an an appropriate service level.