Should you believe in guaranteed ocean services?
Container shipping is rediscovering the potential of enhancing service by providing guarantees, thanks to technology.
Container shipping seems to be embracing the trend towards enforcing commitments from contract stakeholders, whether carriers, forwarders or shippers.
In air freight and in parcel services, guaranteed or “time definite” services have been around for decades, but ocean transport has struggled to keep up.
One of the recent and significant developments is Kuehne + Nagel’s launch of the KN Pledge product. The service provides a 100% money back guarantee on lead-time, as well as extended cargo liability, instant pricing and a carbon footprint offset, valid for full container shipments on an extended scope of 96 countries and for 60,000 port-pairs.
More than a decade ago, Maersk launched Youship.com, which provided a space guarantee with immediate confirmation and clear all-in price to customers. A few years later the premium Daily Maersk service offered a differentiated product with customers, giving guaranteed delivery times in return for higher freight rates.
So, has liner shipping suddenly mutated to be ready for guaranteed services and prices? In fact, this is more of a continuum, as container shipping is not suddenly “disrupted”, but incrementally changing. We can clearly start to see service quality promises being engineered through technology enabled products.
The industry’s notorious lack of service reliability and persistent roll-over practices have created a market gap for these premium services.
These new guaranteed offerings are designed to meet service expectations and delivery for specific market segments, however, not for every shipment. For example, NYSHEX plans to handle no more than 15% of the container market.
Larger, contract BCOs are also tempted to try these online platforms. However, the intensity of customer care required by the main contract accounts is not completely served by these new digital offerings. Agreeing on space protection or commercial compensation is already part of
BCO quarterly business reviews with providers. What matters to shippers is how to ensure the predictability of their supply chain, in Drewry’s experience; when operational issues occur, logistic providers must react proactively to support the shipper, which requires staff resources as well as technology.
Drewry’s e-business consultants confirm that the combination of better technology, better quality of data and more forward-looking processes based on commitments can enable guaranteed services. For example, by providing better volume forecasts to the carriers, where POs can be assigned to vessel sailing 14 weeks before departure, a shipper allows the planning of carriers’ capacity 6 to 8 weeks in advance as well as the assessment of carriage constraints at destination.
Technology is increasing the ability of both customer and provider to commit, based on data from exporter/importer orders, asset physical moves, documentation cycle and other data. Technology allows both providers and shippers/buyers to have another stab at shaping a guaranteed service in some areas, in return for more reliable and predictable volumes and bookings. However, other areas of service quality and some industry practices are still so “hit or miss” that both shippers and carriers are skeptical about the ability to deliver together with 100% reliability.