12th Floor, 39B Truong Son Str.,Tan Binh Dist., HCMC,Vietnam
+84 8 3848 85 91/92
+84 8 3848 85 71

A shipper books cargo on an ocean liner, but it doesn’t make it on the sailing. The carrier rolled it, as it was overbooked, the case for about 30% of cargo, according to Maersk.

Even with a contract, cargo rolling is an issue that plagues the industry. There are solutions, however they involve time consuming contract negotiations, accurate forecasting, and penalties or higher costs to guarantee shipment.

Based on supply and demand, cargo rolling and no-show cargo go hand-in-hand. Just like airlines, carriers usually don’t get paid for empty space, so they book more cargo than they can carry, rolling what’s less valuable to them.

Fixed contracts and the spot market go hand-in-hand as well. Fixed contracts are designed to provide stable shipping rates and reserved cargo space for the shippers. In return, carriers get a forecasted volume and steady income. But long-term contracts aren’t protecting shippers as anticipated.

“It’s enforceable, but to the degree of the contract,” Gary Ferrulli, chief executive officer of Global Logistics & Transport Consulting told Supply Chain Dive. Rolling depends on the spot market rate levels as well as relationships.

If a ship is overbooked and customers include Walmart and a retailer in bankruptcy, “you’re going to roll Walmart’s cargo? Probably not,” said Ferrulli. When he was a vice president for North America, Sea-Land Service, he made decisions each week on which cargo to roll. Usually the decision was based on the customer and relationship value. “In today’s world, it’s a little more complex because of contracts,” he said, but relationship value still matters.

Without guarantees or detailed contracts with teeth, shippers may continue experiencing difficulty getting the cargo space they want, or they’ll pay the spot market price because they failed to negotiate an air-tight contract for the needed space.

Detailed fixed contracts are one way to favorably tilt shipping stability. The other is paying higher rates for guarantees. Newer instant quotes and automated booking programs may start providing helpful guarantees as well, for spot markets.

Change your contracts

When shippers sign a carrier contract, they’re usually generic, said Ferrulli. “They’ll say ‘we’re going to ship with you about 1,000 TEU in this market,'” he said. In the beginning of the year, there’s not much of a capacity issue. But as the year continues, reaching peak shipping times, the shipper may exceed their TEU quote, as they only committed a percentage of their anticipated freight. The carrier then says “we fulfilled our requirement, you fulfilled yours,” and the shipper needs to book on the spot market, he said.

Leave a comment