The Real Rivals in Container Shipping
Welcome to the 97th edition of The LogTech Letter. TLL is a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, I explored how logistics’ last leg role in supply chains has not been ideal with ocean freight taking a greater proportion of total landed cost. This week, I’m explaining why this era of partnerships in LogTech is good for buyers but complicated for vendors.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
Thanks for reading The LogTech Letter! Subscribe for free to receive new posts.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at email@example.com or on Twitter at @LogTechEric.
Sometimes I like to imagine the ocean freight environment like the newscaster battle scene in Anchorman.
“Okay, before we start, let’s go over the ground rules. No touching of the hair or face. And that’s it. Now, fight!”
The fog of war that descends as the news teams battle multiple opponents at once reminds me of what it’s like for a logistics procurement team at a shipper jumping into contract negotiations. The shippers are making deals with container lines and forwarders as they’re being courted by port authorities and terminal operators and wooed by software vendors.
Superficially it looks like the battles are being waged between parties negotiating with one another. And there is definitely some bad blood over what’s gone down the last two years, no doubt about that. But that surface view obscures what’s really happening, which is that carriers are really competing against carriers, forwarders are competing against forwarders, and (most crucially) shippers are competing against other shippers.
It’s pretty well known that carriers compete fiercely with one another, to the extent they dragged rates to negative levels on the Asia-Europe lane in the mid-2010s. The resultant race to the bottom saw Hanjin Shipping go extinct, and a half dozen other carriers get absorbed by larger lines. That consolidation, as we know now, was a key pre-cursor to the carrier industry, in aggregate, turning the pandemic into a historic jackpot.
As demand comes back down to something approaching normal, we’ve already started to see carriers compete with one another in ways that look familiar as past cycles, albeit with a more streamlined structure and (thus far) a strong collective focus on capacity management.
But let’s focus on the buyer side of the equation, because it’s less well understood that when shippers go negotiate rates and service with carriers and forwarders, they are trying to beat their peers, not the parties on the other side of the negotiating table. It’s been said in the last two years that companies compete on supply chain, not on product. And that’s why I say that ocean freight rate negotiations are about the rivalry between shippers, not the parties signing contractual relationships with one another.
If a shipper can’t get space on a vessel but its competitor does, it has lost that skirmish. If a shipper can get space on a vessel but is paying considerably more than its competitor on the same vessel, it has lost that skirmish. If a shipper has 10 days of free time to pick up a container or return it to a terminal, and its competitor has 30 days, it has lost that skirmish. Lose enough skirmishes and you lose the war.
There’s a reason the battle in Anchorman pitted news teams against one another. It wasn’t the Channel 4 news team going to blows with the network, or advertisers, or affiliates. They were fighting their peers in a multi-dimensional battle that, sadly, cost Frank Vitchard an arm.
I’m pretty certain I’m going to get some feedback to this newsletter along the lines of: no, shippers are battling carriers, not each other. But I beg to disagree. As much anger as a shipper that has struggled mightily to serve its customers probably has at seeing its service providers post eye-bulging profits the past two years, the reality is that everyone was exposed to the same market forces. For the first time in most logistics professionals’ lives, access to capacity was not a given. So it was more about how the shipper navigated the market versus its peers, not about what may have become broken relationships with carriers. Again, as I say often here, it’s not about playing the game you want to play, but about playing the game that exists.
So as shippers go into the latter part of ‘22 and early ‘23 baying for blood, remember, there’s a Brick Tamland out there with a trident for those that don’t keep their eyes on who really matters.
TPMTech Registration is Live!
Registration for the second annual TPMTech, Feb. 23-24 in Long Beach, Calif. is live. So get your early bird passes while you can! It’s a 30 percent savings off full price until Oct. 2.
Neal Peart Lyrics of the Week:
The big shots try to hold it back
Fools try to wish it away
The hopeful depend on a world without end
Whatever the hopeless may say
Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):
FourKites last week joined the growing list of LogTech companies to let go of staff, which it explained as mostly surrounding people who were supporting standalone tech it acquired the past two years that is now integrated into its core platform. FourKites has become a big enough brand in the industry for me to need to be on the record with this type of move. But I tried to portray why this phase is pretty tricky for me to navigate here…
Wrote about WiseTech Global adding direct data feeds from ONE and Zim as the race to secure such integrations with container lines heats up. See the link in the section below for my chat today with Freightify CEO Raghav Viswanathan on LogTech Live for more on this. We talked extensively about API connectivity to carriers and the role technology partners can play in being a hub for such connections for forwarding customers.
Last week the US Federal Maritime Commission asked for public comment about whether it needs to mandate data sharing from container lines and terminals. The request for comment is a mandate that’s part of the recent OSRA rewrite that became law in June.
And here are some recent discussions, reports, and analysis I found interesting:
Eric Williams of DAT with a really good post here about understanding what the market is saying and not wasting energy fighting it.
Periodic plug for Cathy Morrow Roberson’s Freight Forward newsletter, which delves into a slowdown in freight growth.
Relatedly, my colleague Bill Mongelluzzo wrote Tuesday about how US imports in July not only didn’t nosedive, they rose relative to June ‘22 and July ‘21, reaching record highs. Turns out this was the only cliff that really mattered anyway.
Fantastic read from Jan Hoffman and the team at UNCTAD about resiliency in maritime logistics.
Great podcast from Zencargo with Sea-Intelligence consultant Bjorn Vang Jensen.
Delighted to be involved in this Freightos event in Barcelona next month. It’ll be my first time in Europe since COVID began!
As referenced above, my guest on LogTech Live earlier today was Raghav Viswanathan, CEO of forwarding tech provider Freightify. We covered a ton of ground, including container line APIs, why digital quoting for international freight is tricky, how rate management fits into the dynamic pricing and quoting process, and more. Stick around for his awesome music suggestions at the end!
Some upcoming events I’ll be involved in:
I’m participating once again in the Parnity Forwarders Online Conference Sept. 14-15. Reach out if you want a discount code, which the organizers have kindly offered to my readers.
Our Inland Distribution Conference in Chicago Sept. 26-28 is now less than two months out. I’ll be doing a one-on-one with Emerge CEO Andrew Leto and then leading four tech-oriented discussions, including the one on small carrier tech, as well as sessions on LTL tech, freight procurement advances, and venture’s future role in trucking. Don’t miss this - it’s the most substantive surface transportation conference in the market.
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or S&P Global, and any opinions are mine only.