The main surcharge that does constantlychange is the Basic Freight (BAS). There can be many charges applied to asingle freight, but the one that makes it volatile is the BAS. This is why it’sso important to have a good system to manage the BAS frequent changes in orderto be efficient. But, what is it that makes the BAS switch that much?
It is only fair to say it’s a matter ofsupply and demand.
As the global economy has grown at a slowerpace, carriers have been building much bigger ships in order to get profit fromthe economy of scale. Nevertheless, this only intensified the gap betweensupply and demand. Because of it, freight rates have had record low values overthe last years.
In fact, there are other factors thatimpact on rates, like fuel price, but they aren’t as much significant as supplyand demand issues. The shipping industry is the first to be affected byvariations in political, environmental, and economic matters. As soon as thereis a change in any of those subjects, there is an immediate impact on maritimeshipping service’s demand. Let’s take, for instance, the War Risk Surcharge,which applies to shipments on war zones and affects the freight rate.
On the other hand, the supply of maritimelogistics service tends to be affected by the overcapacity in the market. Thereare no restrictions on the number of ships that carriers can build, plus wehave to consider the time it takes to put one in actual service. It accentuatesthe supply fluctuation, which has a major impact on the freight rates. So, ifshipping lines want to prevent rates to keep on sliding, they’d need to idlemore ships.
Although it seems very necessary with allof these variations, automated and dynamic pricing doesn’t exist in thisindustry. It is still a very manual process, which slows down the market.Furthermore, it’s impossible or inviable for most freight forwarders to analyzerates fluctuations, because it takes a lot of manual effort.
Since the supply and demand are almostimpossible to control at this point, the maritime shipping industry needs,therefore, more solutions to help reduce the impact of freight rates constantchanging. There’s a significant need to automate and optimize pricing processesin the business.
Actually, we think it’s really important toturn the freight rates into accessible data in real time. It will simplify alot the operations of all of the players in the supply chain, cutting severalcosts out and generating even more profit. Nevertheless, only 2 out of the top10 carriers in the world, are providing instant quotes.
At Cargofive, we want to help improve thequoting process and give the industry a big boost into the new era. Wedeveloped a solution that actually enables freight forwarders to have easierrate management and to create a quote in less than 10 minutes, just with a fewclicks. So, while we wait for carriers to come up with technological advancesin pricing, we will keep on developing solutions to relieve and improvelogistics operations.