If there is one thing the Hanjin bankruptcy made clear to freight forwarding companies and shippers, it is the vital importance of market intelligence and careful selection of international sea freight carriers. Hanjin’s low rates on selected routes made it an attractive proposition on face value, however, when the company went to the wall, the resulting damage to some companies’ supply chains made it crystal clear that cheapest is not always best.
Read on to learn what to consider when selecting a sea freight carrier.
Selecting sea freight carriers for success
In selecting sea freight carriers for customers, an effective freight forwarder or 3PL provider will carefully weigh up the risks.
Factors to consider include indicators around the financial situation of carriers themselves. In the case of Hanjin, market intelligence was already indicating there were ill winds brewing. The company was pursuing old invoices for container detention, and had stopped offering container detention terms to major customers, including freight forwarding companies and leading 3PL providers.
A sound freight forwarder will look at the signs and to the greatest possible extent avoid placing those consigning cargo in a situation where they are exposed to a risky carrier.
However, when a just in time delivery model is being used, and bookings for sea freight cargo are selected around the customer’s desired time slots, the risk can re-emerge due to the use of consolidated services on the part of sea freight carriers. Consolidated services agreements or consortiums mean shipping lines share space to reduce competition on key shipping lanes for international import and export.
This meant some containers of Australia-bound cargo booked on other lines were in fact consigned to Hanjin by those carriers.
How to ensure smooth sailing
When proposing a freight forwarding plan for customers, there are some other crucial factors a freight forwarder or 3PL provider will ideally consider. They include the availability of cargo slots to key Australian ports including Sydney, Melbourne, Brisbane, Adelaide, and Perth, and whether the carriers providing those slots are transparent around consortium/consolidated services agreements and the financial position of each carrier within the consortium.
Other considerations include reliability, the strength of services, whether routes are direct or indirect, flexibility in terms of FCL and LCL arrangements, container detention, space protection and any value-added services.
Whether there is a need to coordinate with air freight services within Australia or overseas, and the availability of equipment and warehousing to facilitate a smooth supply chain process is also an element that may need to be considered.
In developing a strategy for cargo logistics solutions and freight forwarding, all of these factors are weighed up to develop appropriate alternatives.
As a general rule of thumb, the more premium carriers that offer the highest level of reliability, access to key decision makers, helpful customer service staff in Australia and overseas and effective global coverage of all ocean cargo routes are going to also come at a higher price point.
At the lower end of the scale, niche international sea freight carriers or carriers that have less communications and support in Australia come at the lowest price – and also with the greatest risk.
The ongoing ripples for international sea freight carriers
Given the magnitude of the impacts of the Hanjin bankruptcy, the sense in the market is many of the smaller carriers may lose business to the larger firms as customers, including freight forwarders, 3PL providers and direct-booking exporters or importers become more risk-averse.
This makes it even more critical for those consigning containers to scrutinise the choice of carrier carefully. Hanjin may not be the last time vital sea freight cargo will be left on the ocean instead of landed into warehouses.
Effective international freight forwarding companies and 3PL providers such as BCR make it their business to maintain open communication with global partners including shipping companies to boost the level of market intelligence and awareness. This, in turn, ensures customers can be presented with a realistic risk assessment to factor into their decision-making about carriers and freight forwarders. To learn more on how BCR supports customers with sound decision making on sea freight and air freight carriers, contact BCR today.
For more than a century, BCR has continued to help small, medium and large businesses achieve an optimum logistics solution with warehousing and transportation, including air freight and sea freight services to and from the major ports including Brisbane, Sydney, Melbourne, Adelaide and Fremantle (Perth).