Ocean Pricing: The tide is turning | Logistics Management

Further, C.H. Robinson estimates that about two million TEUs will be added during the 2016 and 2017 operating years, while about 600,000 TEUs will be scrapped. The net increase would seem to suggest a continued soft market, however industry consolidation means tighter price control. A good example has been the parcel carriers and railroads, which now constitute an oligarchy—ocean carriers seem to have watched and learned.

Consolidation and joint marketing. Not only do we constantly read about capacity sharing between carriers, but perhaps as important are new mega-deals with large shippers. Alibaba, Amazon, Cosco and Walmart are working deals with large service providers such as Maersk Lines to improve cost and reliability of service by reserving space in such volumes that the carrier can reduce risk, and therefore cost, as they are assured their fixed expenses for operations are covered in the critical east-west sea lanes by their largest customers. Small shippers then get the last few spots at a premium—think about how the airlines sell last minute seats.

Technology. Upgrades in ocean-going technology include new forms of propulsion for ships, greater TEU load-planning capability with increased visibility at the item level, as well as optimization tools to improve fuel use, productivity and turn times at the ports of call. Pricing optimization for carriers is a direct output of these tools.

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Ocean Pricing: The tide is turning – Logistics Management.