Why Rate Management for Shippers has Been Elusive
Welcome to the 111th 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, guest contributor Lauren Beagan broke down the new OSRA law and how the industry can get involved in its enforcement. This week, I’m exploring whether a niche aspect of logistics -rate management - technology has been overlooked
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.
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 eric.johnson@spglobal.com or on Twitter at @LogTechEric.
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Two weeks ago, I had a shipper (a big one - we’re talking six figures in terms of container volume) ask me for recommendations on a ocean rate management solutions provider. It’s not my role to be involved in vendor selection, but I often get asked questions like this and I try to give the lay of the land as best I can. Then it’s up to the shipper (or 3PL) to do their own homework.
This particular conversation, however, had me a little bit perplexed. I’ve been covering the “rate management” category for more than a decade. From covering companies like Catapult and CargoSphere, to Info-X and Portrix, it’s one I knew and felt comfortable discussing. But…all those companies predominantly or wholly catered to forwarders and NVOs, not shippers. It makes sense that providers would mostly target intermediaries. Forwarders and NVOs are responsible for the messy business of ingesting rates from container lines and providing them in a clear format to shippers.
Sounds simple, but it’s been difficult to do, mostly because of the ingestion side. Some providers have set up APIs with carriers to pipe that information in. But individual APIs don’t solve the problem of homogenizing data collection from 20, 60, or 100 carriers that a forwarder or NVO might need to collect. For 20 years, rate management has existed and it’s still a work in progress. On the provision side, lots of advances have been made, most notably turning a rate on a static database into a tailored quote to a shipper request in seconds. That is really where rate management providers have made their hay - in transforming data from a spreadsheet into accurate and real time quoting. The key here is that forwarders and NVOs that are able to quote faster and more accurately win more bids - it’s not rocket science.
The rate management landscape for intermediaries has transformed in recent years, mostly because nearly all of the aforementioned providers have been acquired. Catapult has changed hands a few times, most recently falling into the arms of forwarding software provider Magaya. CargoSphere was bought years ago by forwarder software leader WiseTech Global. Portrix was scooped up by Descartes. Only Info-X has remained independent. But others have arrived, most notably Freightify.
But back to the shipper conversation. What’s interesting is there has just not been the same level of development of rate management tools specifically for shippers. Some of the providers that cater to NVOs can also serve shippers. Another avenue is procurement platforms that have integrated or standalone rate management modules for shippers. But overall, the “shipper rate management” category largely doesn’t exist. Why? Well, one reason is that Excel is the default crutch for shippers. Rate sheets from carriers or forwarders come in, and shippers just aggregate them in an Excel. Remember, Excel is a powerful tool in the right hands.
The other explanation? Shippers don’t have the same process needs, in terms of transforming the ingestion of rates into the provision of rates. They simply need to consume rate information and make decisions, which is a transformation of that, but it’s an internal workflow one, not a customer service one. I also believe that would-be providers of shipper-oriented rate management tools are scared off by the idea that shippers are more likely to invest in a TMS, or a visibility solution, or even a procurement tool, and feel that the being so far down the priority list is too big a hurdle to overcome. This is part of a bigger issue that I’ve written about often - that intermediaries have the luxury of investing in tools that directly impact their logistics business, while transportation execs at shippers have to battle other internal divisions like sales, marketing and product development, for example.
The crux of the situation is that I didn’t exactly know which way to send the shipper, so I sent him in a bunch of different directions with instructions to report back to me about which conversations were most fruitful. When he comes back to me, I’ll address it in a future newsletter.
TPMTech Spotlight
The idea that digital forwarding is somehow different from traditional forwarding has been a constant discussion point the past decade. The rise of Flexport has brought this to the forefront but it’s so much more than that. Which is why it felt right to discuss the issue in clear terms at TPMTech next year. That makes this session on Day 1 a can’t miss. We’ll have Thomas Grunau, global head of business strategy and digitization at DHL Global Forwarding, leading a discussion with three companies that offer forwarding services and could be called “digital forwarders” but have largely eschewed that loaded term. Register for the event here and new registrants can use the code EJTPM25 to get 25 percent off a TPMTech, TPM23, or bundled pass.
Neal Peart Lyrics of the Week
Every day we’re standing
In a time capsule
Racing down a river from the past
Every day we’re standing
In a wind tunnel
Facing down the future coming fast
Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):
Not a technology story per se, but the big news I wrote about this week was CMA CGM acquiring two terminals in the Port of New York and New Jersey. I also wrote in more depth about how the move, from the French carrier’s perspective, was less about cargo permanently migrating from the US West Coast to East Coast and more about building in adaptability to serve shippers end-to-end.
Also big news this week: three big name freight brokers downing arms to work together on truckload appointment scheduling standards. The goal is to lure in other brokers and carriers to join the standards consortium and compete on solutions built atop the standards.
Also talked to Bertrand Chen, GSBN’s CEO, about the impact of TradeLens’ demise on the organization he runs.
Some upcoming events I’ll be involved in:
My guest on the Dec. 16 episode of LogTech Live will be Ryan Schreiber, VP of industry and growth and transportation consultant Metafora. If you’ve heard Ryan talk, you know 30 minutes of his perspective is a can’t miss. If you haven’t caught Ryan before, well, you’re going to want to catch him. I may be able to tempt into a signature diatribe against TMS. Show note: next week’s episode will be at 11:30 am ET, not the customary time, so may sure you adjust your schedules accordingly! Make sure you’re subscribed to my show to get updates and to watch archived episodes.
I’ll be moderating a JOC webcast at 2 pm ET Jan. talking about how the logistics technology industry - and buyers of software - will adjust to a very uncertain 2023. Register for the free event here.