For many years, non-vessel-operating common carriers were considered a stepchild of the maritime industry, but that ship turned around in 2010 when importers had trouble securing vessel space in the trans-Pacific. Importers turned to NVOs for relief, and they delivered the capacity importers desperately needed.
When the next contract cycle began in 2011, many of the importers that had used NVOs for the first time booked a portion of their freight with the intermediaries.
Many shippers today deal regularly with NVOs to secure capacity and equipment when the market is tight, or for discounted rates when the trade is in a seasonal slump. Even some ocean carriers that used to shun NVOs now welcome their bookings and actively seek NVO freight.
“The landscape has definitely shifted,” said Stephen Aldridge, president of Encompass Global Logistics.
NVOs expect to prove their worth again this spring as carriers in the eastbound Pacific attempt to implement two general rate increases. The Transpacific Stabilization Agreement, a discussion group representing 15 carriers in the trade, recently announced its guidelines for a $300 per-40-foot container increase effective March 15, to be followed by increases ranging from $500 to $700 per FEU for the 2012-2013 service contracts beginning around May 1.
In the volatile eastbound Pacific this past year, spot rates have exceeded $2,000 per FEU and dropped as low as $800, according to various indexes. Importers that reserved a portion of their cargo for NVOs were able to smooth out the peaks and valleys. Some importers secured spot rates that fell below their contract rates during seasonal slack periods.
In general, there are two types of NVOs. Some emphasize price, offering port-to-port rates that often can be lower than what cargo owners could get if they booked directly with carriers. These NVOs also help carriers fill empty slots during seasonal slumps.
Increasingly, NVOs are offering value-added services that include purchase order management, cargo tracking, consolidation and deconsolidation, warehouse and distribution and customs brokerage services.
Shippers are looking for assistance in streamlining their transportation networks, especially when they extend their supply chains deeper into regions where they have no experience. NVOs offer cargo interests a menu of services and on-the-ground representation, said Dan Gardner, CEO of RF International and Ocean World Lines.
Although some ocean carriers still view NVOs as purely focused on price, many NVOs today are matching up carriers that offer specialized services with shippers that need those services, to the benefit of both parties.
Aldridge said some shippers seek the fastest transit time or a specific cut-off day in a particular lane, and the NVO, which has relationships with a large number of carriers, can find the carrier that fits the shipper’s needs. “The shipper wants a Tuesday cut-off? The NVO can find him a carrier with a Tuesday cut-off,” he said.
In many instances, those arrangements result in new freight for the carrier, which may not have the staff or contacts in the shipper community to find these customers on its own.
The best indication NVOs are proving their worth to carriers as well as shippers is that NVO-controlled cargo the past few years has increased faster than the overall growth in cargo volume. “Carriers for sure need the intermediaries as, depending on the trade lane, they supply upward of 50 percent of the total volume,” said Bill Woods, managing director of America’s Sales Agency.
Since they operate deep in the transportation supply chain, NVOs can see problems before they become evident to carriers or shippers. NVOs attempt to head off the problems before they disrupt the trade. Woods, for example, urges carriers to release information on their equipment availability on a weekly basis. This will save shippers much time, effort and phone calls as they zero in on those carriers that can fill their equipment needs.
In this new environment, carriers are courting NVOs much earlier in the contracting process than they used to. Rather than waiting to conclude negotiations with their major shipper accounts before turning to NVOs, carriers are approaching the intermediaries earlier in contracting season, and some are even running NVO negotiations parallel with their shipper negotiations, Gardner said.