The state of ocean freight continues to evolve in the wake of peak season, approaching holiday shipping deadlines, and ongoing disruptions. The Freightos Baltic Index has slipped slightly to $9,351 per container as of this writing, but looking at the bigger picture over time raises even more concern. The rate as of November 20, 2020, was $2,375. As of November 20, 2021, the costs have skyrocketed to nearly $7,000 more per container.
A simple 10% mistake on a single shipment might not have been a huge error in the past. But imagine this reality: With ocean freight costs setting records, those same errors are now setting records. That simple 10% error has scaled to a 40% increase of erroneous costs, and shippers need to understand what this means for transportation spending and how it tracks back to the need for data-driven management.
Ocean freight is often forgotten by today's shippers focused on finding over-the-road transportation. However, failures in ocean transportation inevitably carry over into the OTR market. Without management of ocean shipments, downstream supply chain costs will grow. Increased activities in drayage and the need for more temporary storage to hold goods awaiting drayage contribute to additional costs. In turn, those drivers busy on drayage are now unavailable for long-haul freight, creating a run on capacity.
It's also impractical to shift solely to air freight when ocean rates soar. There's a finite amount of airfreight capacity, especially as the uncertainty over new COVID variants emerges. But that issue overlooks another problem—why are ocean shipments more susceptible to errors?
The answer to that question rests with the age of freight management itself. Ocean shippers have usually relied on a small pool of carriers, and there has been a significant disconnect between container visibility and access. As a result, shippers have experienced trouble finding other liners available to move ocean shipments. Problems become further evident as OTR GRIs take effect. Still, such limitations and changes meant shippers had to pay whatever a carrier charges or risk freight refusal. But that's beginning to change through digital capabilities.
In recent months, new digital freight marketplaces, such as FreightMango, have arisen to provide a load-matching service in ocean container management. Rather than relying on antiquated container tracking, digital freight marketplaces in ocean transport make it easier to know your expected costs and keep those costs in check. That's the first step toward making meaningful improvements in ocean freight cost reductions. The next comes from the use of auditing and data to track performance.
Like OTR freight data, auditing container shipping costs is a lifeline for today's shippers. Rather than being at the mercy of carriers, shippers can aggregate and analyze data to make informed business decisions, such as knowing which ocean carriers have higher on-time delivery rates, are more likely to roll cargo, and are more likely to have errors in invoices.
With some variances by source, the rate of cost-impacting ocean transport errors sits somewhere between 20-30% percent. However, past industry experts have found error rates of up to 80%.
The difference is simple. Not all errors result in changes to costs. But they may amount to missed deliveries or inaccuracies in inventory. Also, the lack of data that would otherwise be unavailable without auditing adds an additional pain point to unsuspecting costs and rate increases.
The key to success lies in aggregating all the data from all ocean freight transporters, normalizing it to make apples-to-apples comparisons, deriving actionable insights through analytics, and making those insights easy-to-view within custom dashboards. Those are functions that rest at the heart of Intelligent Audit.
Additionally, shippers that audit ocean transport data are more likely to plan for inventory changes, account for differences in cultural norms (such as the coming Chinese New Year), and know how far in advance to order from suppliers to avoid disruptions.
Yes, it's a complex process, but using data and working with supply chain consultants make it easier and less likely to result in stockouts in your network. Also, a full view, including ocean data, also improves the ability to plan for hub injection or zone skipping use in parcel too.
The best-laid plans for ocean freight management can still fall by the wayside without a careful eye on the prize—cost reductions. Shippers need to realize that ocean freight errors are happening, and it's time to start using data and intelligent solutions to keep those errors from undermining your supply chain. Contact Intelligent Audit to learn more about where your team could realize savings in ocean shipping management today.
Set up a call with one of our experts to discuss how Intelligent Audit can help your business uncover opportunities for cost reduction and supply chain improvements through automated freight audit and recovery, business intelligence and analytics, contract optimization, and more.
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