Why Forwarders and NVOCC's Matter More Than Ever
A lot gets written, but not a lot gets said, about the importance of freight forwarders and NVOCC’s in the world’s supply chain. After all, we in the industry know that these intermediaries account for fully one-third of the $260 billion annual container-shipping market worldwide.
And we also know that these critical players are much more than just “brokers.” At CoLoadX we view them as Value-Added Resellers.
So we were extremely pleased when we were able to convey this point in a recent article by Sandra Beckwith in Inbound Logistics. The piece, which also addresses the broader issue of carrier consolidation following the Hanjin bankruptcy, highlights the many ways that various industry players need to plan for increased complexity in logistics.
Read more: As Hanjin Falls, NVOCCs Rise
Of course, this includes the need for advanced multi-modal tracking. But it also requires that we all understand the critical role freight forwarders and NVOCC’s play in the process. Beckwith writes:
"There's often confusion around the terms freight forwarder and non-vessel-operating common carrier or NVOCC," says Fauad Shariff, CEO of The CoLoadX Corporation, which provides an ocean freight procurement platform for forwarders and NVOCCs. To differentiate the terms, Shariff uses a travel analogy: The freight forwarder is like a travel agency but with a significantly higher value-added service offering, while the NVOCC is more like an airline consolidator that might offer freight forwarding services as well.
"NVOCCs make massive capacity commitments to carriers, so their job is to fulfill those commitments by re-selling that capacity to shippers or freight forwarders," Shariff explains.
To further clarify the distinctive services that each provides, let us offer the following examples:
- Freight forwarders do buy and resell container capacity, but that’s just one part of their service offering. Need a truck to pick up your export cargo in Kennesaw, GA? There’s a freight forwarder who takes care of that. Need to clear Russian customs? Your local or global freight forwarder has you covered. Need those goods delivered in Kiev? Guess who’s there to make it happen? Put those international transaction pieces together, and it’s clear that forwarders not only matter to the ocean shipping market, but actually influence all or part of the $3.5 trillion spent on logistics annually worldwide. And better yet, on January 1, 2018, they’ll go right back at it all over again.
- And what about NVOCC’s? Sounds like they simply buy and sell container space and take a markup for a wholesale price, right? Wrong! Did you ever go on vacation, find the ultimate antique coffee table, buy it and tell the shop owner to ship it back to your home? Or did you export a few crates of your company’s product that couldn’t fit into the last full container load you shipped out? If so, then your good reached its destination solely because of an NVOCC. They add tremendous value and speed by consolidating small shipments into a container with goods from other companies. The result is a massive cost saving over a comparable mode of transport such as air freight, which can be prohibitively expensive (no more coffee table). And it can be considerably faster than waiting for your customers to order enough goods to fill up a full container on your own. These costs can mean product shortages, delayed deliveries or other lost opportunities.
One could plausibly make the argument that, even with these all these other trends -- carriers consolidating and e-commerce dominating -- freight forwarders and NVOCC’s are in fact the most important stakeholders in the logistics process. Just try getting your next coffee table without them!
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