International transport and logistics executives are increasingly benchmarking their companies’ costs and supplier terms in ocean transport contracts, according to shipping consultancy Drewry.
In the past 6 months, the ocean transport spend under carrier contracts benchmarked by beneficial cargo owners (BCO) increased by 50% to USD 2.2 billion. The number of benchmarked routes rose by 81% and the volume of benchmarked dry container TEU jumped by 67%.
“Benchmarking ocean contract rates, supplier transit times and contractual terms such as demurrage and detention is becoming more established, as BCOs realise the importance of benchmarking for setting target rates, negotiation and rate reviews, particularly when markets are volatile,” Philip Damas, head of Drewry’s logistics practice, said.
Drewry has seen a change in the attitude of some BCOs, who were initially sceptical about comparing their contract terms confidentially with those of other companies and said that they already benefitted from very favourable terms.
As the BCOs’ competitive pressures have increased and as contract rates have stopped declining, transportation executives have become more open to the use of peer-to-peer groups to identify the most favourable terms of cost and service and to monitor their own performance as buyers against companies moving the same volume of freight under contract.
Using spot rate indices, many BCOs are also benchmarking their rates against spot international ocean freight rates and spot international air freight rates.