What Can David Letterman Teach Us About Freight Shipping?
Remember when David Letterman would introduce his famous Top 10 Lists with increasingly obscure cities to cite as the “home office?” Sioux City...Omaha...Oneonta. He always picked a place that sat far from the shore.
Sometimes, the NVOCC business can sound suspiciously like one of those Letterman bits.. There are offices in Omaha, Tulsa, Reno and other markets that sit far from the ocean. We see NVOCC’s with massive, global footprints of 190 offices in 100 different countries. We see small NVOCC’s aspire to having offices in multiple markets. Offices or branches, it seems, are a sign of scale or success in the logistics business.We respectfully disagree.
Offices and the teams that staff them can be valuable. But incremental offices often have diminishing value. Your sixth office adds less to your business than your fifth office, until you reach a point when new offices aren’t helping much at all. Why? Well, there are two issues at play here:
- As we’ve frequently mentioned, rate shopping is often mistaken for freight forwarding. So if you have a pricing team in Houston, and an office in Denver, you have excess operational capacity dedicated to the very same port of sailing.
- More importantly, NVOCC’s are driving up their customer acquisition costs by opening more and more branches and offices without providing them with added benefits.
“Customer acquisition cost” is just a fancy way of saying “cost of sales.” It refers to hiring sales reps, reimbursements for driving, entertainment, travel and other expenses. In today’s logistics industry these expenses are considered “investments” needed to realize growth and greater market share.
In reality, however, this manual path to growth is unsustainable. The costs associated with such sales growth creates a burden that shows up in per-container or per-shipment pricing, which either adversely impacts sales growth or profitability...and that’s before subtracting the cost of additional operations.
Small NVOCC’s who don’t have such infrastructure are better off in terms of operating costs, but at a big disadvantage in terms of access to new sales opportunities. Hence the only path they’ve ever known -- adding new staff and locations -- has to be pursued in order to grow and gain market share.
At CoLoadX we’ve been on both sides of this problem, and came up with a better way. We’ve built a platform where freight forwarders and NVOCC’s can transact online. We’ve made it anonymous so that there’s no “race to the bottom” in terms of price discounting. We’ve kept cargo owners out so that your pricing stays between you and your customer only. And we’re building tools to give you confidence in the rates you’re getting or putting out in the market.
All we ask in return is that you think twice about that office in Omaha.
Read more: How the Supersized Era of Container Shipping Is Changing the way Ports Work
By: CoLoadX on May 12, 2017, 2:06 p.m.