As many small and medium-sized shippers will attest, the most daunting challenge as the logistics industry moves forward is securing access to competitive and reliable international ocean transportation. This situation has certainly become more critical since the summer of 2020, but it was an existing trajectory for many years.
Historically, if a small shipper was knowledgeable enough and sufficiently staffed, it negotiated ocean service and rates for itself, signing annual service contracts with one or more carrier partners and ensuring reliable access to capacity at predictable rates, rather than outsourcing that function to a forwarder. As the number of global container carriers dwindled and their individual market shares swelled as services were organized into the three main vessel-sharing alliances, there was less opportunity for shippers to negotiate.
In fact, with such tremendous market share and enormous ships to fill, the carriers discovered that it was unattractive to manage a plethora of smaller shippers in any traditional way and eventually stopped offering service contracts with minimum commitments that a small or medium-sized business could meet. Instead, carriers used their largest and most dependable shipper volumes by lane as their baseload and then sold the remaining limited space — if any was left over — to the highest bidder. Whether through a non-vessel-operating carrier (NVO) or a sophisticated proprietary website that sets prices based on current availability as well as desirability — i.e., effort, weight, equipment needs at destination, etc. — of a particular cargo shipment, this activity has accelerated since June 2020.
Given this, small and medium-size shippers must get “bigger” by securing space under the umbrella of a large NVO or shippers association, though both options are also becoming quite limited due to carrier constraints, and/or by revising supply chains to concentrate more volume into fewer lanes.
But shippers only get so big in this manner, and we all want to protect the ability for our business to thrive. As such, all US businesses that count on reliable ocean transportation should support the Ocean Shipping Reform Act of 2021 (HR 4996). Among other things, the legislation seeks to ensure just and reasonable practices in the allocation of vessel space, helping the US Federal Maritime Commission to fulfill its mission to “ensure a competitive and reliable international ocean transportation supply system that supports the US economy.”