The Pros And Cons Of Working With NVOCCs And 3PLs

When we think of “lowest rates” we may automatically qualify it as a good deal. Yes, “lowest freight rates” might be the lowest at the time, but are increasingly subjective to this volatile market that is influenced by number of different, constantly changing factors such as open space on a vessel, cost of fuel, actual supply - demand and other unpredictable factors like port congestion, port strikes that we hear about all the time. 

Coming in under forecast when shipping cargo is usually a great thing. However, it is not always so positive when the market is at a low and your competition is paying even less.  In addition, internal resources and shipping expertise are not always readily available to make the necessary changes on the fly. 

NVOCCs Come To The Rescue

That said, shippers might want to consider partnering with an NVOCC which legally operates as a carrier by accepting all the responsibilities for the cargo as well as issuing their own bill of lading. NVOCCs work with multiple shippers, BCOs and commit huge volumes to different VOCCs, which means higher levels of buying power and discounted rates. 

The surging number of mega ships and sluggish global trade growth have recently forced even the largest VOCCs to restructure their service loops, reduce number of port of calls that have left shippers with fewer shipping options.

Although VOCCs have become more flexible, offering multiple sailing schedules through shipping alliances, VOCCs typically run only one sailing per port per week. For shippers who are running light on inventory, that might not be soon enough. Since NVOCCs work with carriers from multiple shipping alliances they can offer various sailing options whether it’s high or low season, existing markets for shippers or new territories they want to penetrate into. 

I met a seasoned salesman from a Freight Forwarder not too long ago who shared his secret recipe for selling their services for shippers. He said, “I just ask the magic question as; “Tell me where it hurts and we will make it go away” – Indeed, it says everything. 

Freight Forwarders that either access NVOCCs, or is an NVOCC, specialize in taking the hassle out of logistics, and offer up long list of value added services such as real time visibility, guaranteed on-time delivery, port-to-port deliveries. – Having said that there was an interesting article in The Loadstar back in June 2016 that quoted Rolf Niese, an indepedent senior consultant and previously  Global Head of Logistics Operations at British American Tobacco saying “Shipping lines needed to imitate freight forwarders and offer a greater range of services, as well as differentiate their offering from competitors.”

Full Service Pampering From Freight Forwarders

Freight Forwarders know very well that they can’t compete with VOCCs on price alone so their focus is more on value adding services powered by huge investments into IT/communication systems, hiring and training industry professionals, specializing in niche and general logistics services, customer services not only in their domestic markets but around the world. 

Shippers, who do not have in-house logistics professionals can face a serious hole when trying to optimize their logistics operations. In many cases, these companies need to outsource their logistics responsibilities in order to respond to market volatility or fix any issues within their supply chain. . -- In my opinion, shippers with a fully outsourced business model are not only losing control of their own supply chain but are also leaving money on the table with every container shipped. 

VOCCs or NVOCC/Freight Forwarders | Pick What Works For You 

There’s no cut and dry solution for every shipper given the complexities of the industry. While there are a vast number of factors and variables to consider, basing your decision on who to partner with based solely on a single factor whether it’s price or service, could lead your company down the road to ruin. Consider the shape and scope of your business and work with the one who best fits your needs.