What is covered in this article:
What does procurement advantage mean in freight forwarding?
In connection with ocean freight shipping, procurement is the activity of sourcing and procuring the best ocean freight rates possible as well as the most suitable shipping services from one of the many carriers. As a Freight Forwarder or NVOCC, your life is basically a cycle of continuous pressure to procure ocean shipping services that have the best rates, service and capacity.
In the last 2 years, procurement in ocean shipping has been an undeniable challenge for especially a small to mid-sized freight forwarder. Through planning, preparation, up-to-date market data and the right freight forwarder network strategy, a smaller forwarding agent can overcome this challenge. Overcoming the challenge of being the little guy in a market dominated by giants and successfully securing the best rates, services and capacity is what “procurement advantage” means.
What will happen to those who don’t have a procurement strategy?
It is hard to remain blind to the obvious outcome. Independent freight forwarders across the globe are receiving unbearable pressure from all fronts- the big forwarding companies, insanely high freight rates, and carriers trying to push forwarders out of the equation. Carriers like Maersk are going directly for BCOs and restricting the space a forwarder can secure on their ships. Their strategy is clear. And unfortunately we see other carriers following suit.
How can an independent forwarder gain procurement advantage?
Combining volumes. Survival of the fittest is a real phenomenon and is very much applicable to the shipping industry. It's not enough to be a local independent freight forwarder with a small but loyal client base anymore. The market has evolved and now the only way to guarantee the survival of a small forwarding business is to ban together with other like minded forwarding professionals. This means combining your freight volumes to achieve real buying power against giants like Keuhne and DHL.
Forwarders with larger volumes get of course more benefits than those who don’t. Consolidating volumes attracts attention and better service from carriers, as consolidated and steady volumes are also advantageous to the carriers. For carriers it is attractive to have a guaranteed base load. So this puts you into a position to negotiate a longer validity contract with the carriers. In effect, helping you avoid or better manage freight rate fluctuations during your shipment period.
Combining volumes can be done more easily than you think
One of the biggest benefits you can gain through a membership in a freight forwarder network is procurement advantages. As the market evolves so too does the concept of the freight forwarder agency network. Networks like 7ConNetwork operate their network like a forwarding company rather than the traditional concept of a membership club for networking. Under the flag of 7ConNetwork and plugged into a wholly integrated freight booking system, independently licensed freight forwarders can effortlessly combine cargo with their member agents to secure the best rates and service.