K+N throws down guaranteed transit gauntlet

K+N throws down guaranteed transit gauntlet

Kuehne + Nagel’s KN Pledge offers shippers a money-back guarantee if they fail to hit pre-established transit times on port-to-port or door-to-door container shipments. Photo credit: Shutterstock.com.

A new guaranteed transit time full containerload (FCL) product tethered to instant quoting capabilities from the global freight forwarder Kuehne + Nagel (K+N) portends an era of technology-led product development for shippers as incumbent third-party logistics providers seek to fight back against a wave of digital upstarts.

KN Pledge, which the Switzerland-based company began offering to customers last week, provides shippers with a money-back guarantee if they fail to hit pre-established transit times of FCL shipments, regardless of whether the move is port-to-port or door-to-door. The service also includes instant online spot pricing for shippers, placing K+N in a select group of global forwarders able to offer such pricing today.

The product has echoes in past attempts by ocean carriers to differentiate through guaranteed transit times, most notably Maersk Line’s failed Maersk Daily product (abandoned in 2015) and current offerings from APL and Matson.

APL’s Eagle Guaranteed suite of services gives US importers guaranteed transits from 150 ports in Asia and the Middle East. In March, the line added guaranteed intermodal service to Chicago, Memphis, Dallas, and Kansas City. Matson, meanwhile, has offered guaranteed intermodal transits from Shanghai to Chicago, New York, Kansas City, Dallas, and Memphis via Long Beach since 2007.

APL Logistics (APLL), meanwhile, offers a guaranteed transit time service connecting less-than-containerload (LCL) ocean transport with less-than-truckload (LTL) surface transportation in North America. The service, Ocean Guaranteed, is offered from 13 ports in Asia to virtually US destination and select ones in Mexico, and APLL offers a 20 percent refund if a shipment arrives late.

APLL also offers an FCL day definite product, APL Guaranteed Continental, with the same 20 percent refund for late deliveries. Shippers can move containers intact through Los Angeles or Seattle or choose to have it transloaded in Los Angeles. APLL and APL are no longer affiliated, as APL was acquired by CMA CGM in 2016 and APLL was acquired by Kintetsu Express in 2015.

The LTL carrier Old Dominion Freight Line nearly a decade ago worked with various ocean carriers to establish a guaranteed transit time product, called Pacific Promise, linking its LTL network with LCL freight from Asia.

Premium pricing for a premium product

Marcus Reimann, K+N’s senior vice president for seafreight North America, told JOC.com the data-driven nature of KN Pledge separates it from past attempts at guaranteed products. Pricing is based on K+N’s vast database of information on transit times for ocean and inland modes.

“You can go on Maersk and Hapag-Lloyd’s websites and get an instant quote,” he said. “We wanted to definitely be different. We used the data we have to come up with realistic lead times and made a product worldwide out of that.”

That confidence in its data is what allows K+N to offer a money-back guarantee for service on assets that are out of its direct control. This somewhat mirrors the way some newer US domestic freight brokerages — Transfix and Loadsmart, for example — guarantee cargo tendered will be accepted based on a rate agreed to on their online platforms. Those companies, often dubbed “digital brokers,” believe they can uphold such service guarantees because of a high confidence in their predictive pricing data. Perhaps sensing an opportunity to explore such a product again, Maersk’s venture capital arm has taken a stake in New York-based Loadsmart.

KN Pledge is a premium product, Reimann said, as other such products from liner carriers have tended to be, and as such, commands a premium price. The delta in pricing between a traditional rate and a KN Pledge rate depends on a couple factors, namely the trade lane and whether the rate is port-to-port or door-to-door, especially considering the inland terminal and trucking situation in the US. In general, the more complex the move, the higher the premium for the service.

“On port-to-port, we’re very confident in our data,” Reimann said. “On terminal and inland rail moves, we constantly update our data based on the actual situation.”

In November, K+N released a tool within its Sea Explorer platform designed to enable any party to compare lead times on direct ocean services with carrier-promoted transit time, but the tool at that time didn't connect to K+N's online quoting and booking tool, which covers airfreight and LCL freight but didn't extend to FCL. 

Other elements of KN Pledge include expanded cargo liability coverage — up to $100,000 per container compared with conventional liability coverage for a non-Pledge container — and a carbon offset via “contributions to the development of four nature-based projects in Indonesia, Kenya, and Peru,” the company said.

Prior attempts at premium ocean products have largely failed due to a lack of demand, as shippers have tended to prefer to pay lower base freight rates and deal with any fallout from non-guaranteed service after the fact. This is especially true of shippers that have become more adept at mitigating the impacts of uneven transit times or rolled cargo through the use of visibility and transportation management systems that let them adjust on the fly.

The instant pricing component of the product places K+N in a select circle of other forwarders offering instant pricing via their own channels. Agility, Schenker, and Geodis are among others that do so today. Other forwarders are developing such a capability, either through marketplaces such as Freightos or Simpliship, or through software-as-a-service front-end pricing solutions such as Kontainers. As to whether K+N will extend instant quoting beyond the Pledge product, Reimann said the company will monitor the market acceptance of the product and decide later whether to expand that tool.

Along with Maersk and Hapag-Lloyd, the liner carrier CMA CGM said Thursday it is now offering instant quoting capability through a new suite of online solutions. CMA CGM previously offered instant quotes only through the Freightos marketplace.

“All customers are looking for first indication on price,” Reimann said. “It’s interesting for a customer with a new lane, or a new customer looking to ship one or two containers from Asia, for example, or the e-commerce customer who really needs product and is not aware of how transportation works. I think this will be a slow generational shift. It will take a moment, but we need to invest into this and make it work. Service still plays a role, and that’s where we need to differentiate. But of course, you need the tools.”

Contact Eric Johnson at eric.johnson@ihsmarkit.com and follow him on Twitter: @LogTechEric.

 

Comments

The word "guarantee" from a forward in re transit time is very interesting. For a company that doesn't actually physically handle the material ever, that's a pretty strong statement unless there's some algorithm that says, amongst other things, "With X% of confidence, the transit time will be no longer than Y days," which ultimately is only mildly useful. Long transit times aren't necessarily bad if I can plan to that particular time to an overwhelming majority of instances. If I'm told the realistic max transit time but I know there's a high degree of variability beneath that transit time, say max of 21 days but could be as fast as 14 days with an average of maybe 18 days, then the "guarantee" of 21 days really isn't very useful.