When a rose is not a rose

When a rose is not a rose

There have been numerous articles and public statements recently regarding NVOs. And while Shakespeare once wrote that a rose by any other name is still a rose, you can't say the same is true for NVOs.

Let's start by looking at NSAs. NSAs are the equivalent of service contracts for non-vessel-operating common carriers. Peter Tirschwell wrote in early May: "NSAs - why so few?" Steven Blust, chairman of the Federal Maritime Commission, seems to think it's just a matter of time before NSAs become part of the normal landscape for NVOs.

Dick Rebolledo, president of Seascape Lines, disagrees. In a letter to the JoC, he writes: "As a businessman in our industry, I do not usually see regulations move an industry one way or another." He adds that in his market, which he describes as B, C and D accounts, customers are relatively small and aren't sure where the next cargo moves will come from, so they don't want to commit to a contract. He also states that larger shippers wouldn't need to use NVOs because they could contract directly with carriers.

Adolf Adrion, Hapag-Lloyd's managing director, said in an interview with the JoC in London: "Over 60 percent of our customers are 3PLs and logistics service providers. We don't want to get into the business of having to provide individualized customer service to our logistics customers on behalf of their customers."

What do the two issues noted above have in common? Why have I linked them? Because they point to the significant differences between NVOs and 3PLs in terms of what they do, how they do it and whom they do it with.

Rebolledo describes his customer base and considers Seascape Lines the same as "the other 98 percent of small to medium-sized NVOs." Adrion says about 60 percent of Hapag-Lloyd's customers are 3PLs, and Hapag-Lloyd (and CP Ships) carried approximately 4.8 million TEUs in 2005, so those NVO clients can't have many B, C and D accounts. In fact, NVOs accounted for 28 million TEUs in the global market in 2004 (32 percent of global containerized traffic) and were projected to have lifted 33.5 million TEUs (33 percent of the total) in 2005.

The world's top four NVOs (Kuehne & Nagel, DHL, Panalpina and Schenker) moved a combined 5.5 million TEUs in 2005. If Kuehne & Nagel were an ocean carrier, it would be one of the top 20 carriers in the world. The world of Seascape and the world of Kuehne & Nagel obviously are not the same.

What might one conclude from this, other than that there are differences in the NVO industry, just as there are in retailing, manufacturing, the ocean-carrier industry, etc? The differences begin to answer some questions, such as, "NSAs - Why so few?" It's not that NSAs haven't caught on; it's that other forms of NVO contracting were here long before the FMC decided to take its action on NSAs.

In the U.S. foreign trades, they couldn't be called service contracts, but they could and do have many other names. Contract for logistical services and logistical services contract are two of the more popular names. And they aren't with B, C and D accounts. They are with many household names and industry leaders. As cargo interests globalized, they had to adapt to new environments, and in many instances the NVO-3PL was there to help them, not just with ocean services, but with inland transportation, warehousing, customs and government issues and knowledge of the local business environment. If your company had 5,000, 10,000 or even 50,000 movements a year, might it make sense to team up with someone with more than 1 million movements a year? Yes, it happens.

What other differences are there? Obviously, Hapag-Lloyd considers NVOs-3PLs an integral part of its overall marketing strategy, and puts a particular focus on that segment of the carrier's overall business. Other carriers take a different view; while they are indeed customers in that they offer freight to the ocean carriers, they also are competitors for segments of the overall global market.

It's one thing for 3PLs to have B, C and D accounts as their customer base; it's a totally different equation when Ford and other large companies make up a significant segment of a 3PL's overall volumes. This is an example of differing views from people looking at virtually the same thing. So when we look at the world of NVOs and 3PLs, they are not the same, by any other name - or even the same name.