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CargoSphere and Drewry Release Report on the Magnitude and Burden of Rate Management

CargoSphere and Drewry Release Report on the Magnitude and Burden of Rate Management
Danny Gill

CargoSphere have announced findings from an original research project commissioned from Drewry Supply Chain Advisors, which quantifies an annual cost burden of $500 million for freight forwarders (FFs) to find and manage ever-changing ocean carrier rates. The $500 million expense represents costs incurred by only one ocean shipping business segment. It does not include the inefficiencies and costs incurred by the rate originators, ocean carriers, or BCO (beneficial cargo owner) shippers. Furthermore, it also does not include the cost of system investments to support or reduce labor costs.

Drewry first defined the size and makeup of the global freight forwarding industry, estimate the total number around 50,000. They conducted the primary research with a sampling of small, medium and large FFs. It was determined that the global FF industry annually spends 24.4 million hours doing buy-rate management including inputting rate data into their company’s internal systems. This time and effort adds up to an overall annual cost of $500 million to the global FF community.

“The cost burden of global ocean freight rate processing is a huge weight on the industry as a whole. One that is not sustainable for global FFs, carriers or BCO shippers. This exorbitant cost underscores the need to focus on digitizing all aspects of rate management, networking and distribution, as it is an extremely important business enabler for global ocean shipping. After all, what company today has the luxury of ignoring technology solutions that can improve productivity, competitive position, and customer satisfaction!” said Neil Barni, president of CargoSphere. “Our vision has always been to align our technology with the needs of the industry to improve business performance, rather than promoting disintermediation or a race to the bottom for carriers and forwarders.”

The study concluded that the bulk of the industry cost from this problem is at the small forwarder level. The size of these small businesses makes the process of receiving and processing carrier buy-rate information about twice as burdensome as for medium size forwarders; therefore, this segment would likely benefit the most from a platform which consolidates and updates buy rates.

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Danny Gill

Danny is currently a Contributing Writer for Airfreight Logistics and Logistics Manager (LM) and is quite the foodie. He’s always on the hunt for new and exciting dishes to sample, and is never one to back down from a spicy challenge. His travels have taken him around the world, and he’s been able to experience many different cultures (and food).

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