Credit where it’s due
One of the often-underreported issues stemming from the economic downturn the past 18 months has been the way dwindling revenue has hit the financial side of the supply chain.
The oil that greases that chain has often been credit. And in the case of the ocean shipper-ocean carrier interaction, much is determined by whether shippers are granted credit terms.
It wasn’t just banks that pulled back on credit lines in 2009; ocean carriers, with severe day-to-day cash flow concerns of their own last year, started being a little more choosy about to whom they extended credit.
Remember Norm, the famous beer-swilling character on the sitcom
Cheers? He had a tab the size of Massachusetts by the time the show ended, mostly because Sam knew exactly where to find Norm the next day — drinking more beer at his bar. Well, carriers are likelier to extend credit terms to shippers they know and value (re: those who bring in big volume) than those who shop around for rates and move only a few TEUs here and there.
An official with a non-vessel-operating common carrier told
American Shipper recently that as few as 5 percent of direct carrier customers are offered credit terms these days. He said one of the advantages that NVOs provide is that as many as 95 percent of their customers are offered credit terms — a major service advantage for shippers who still struggle with cash flow.
A carrier representative
American Shipper contacted to verify the claim said the 5 percent number was in the right ballpark, but he cautioned that the number referred to the percentage of customers, not the percentage of a line’s volume. For instance, maybe only one out of 20 customers gets a line of credit from a carrier, but the volumes of those customers who get credit terms assuredly represent far more than 5 percent of that carrier’s volume.
The credit-giving profile of each carrier will vary wildly, depending on the philosophy and financial health of each company. In the meantime, and as ocean freight rates continue to rise, NVOs will likely play up the fact they are willing to offer credit to their customers as a way to dissuade shippers from booking rates directly with lines.
And rightly so. If cash is king, credit is a pretty handy thing to have these days.
‘ Eric Johnson
(Be sure to read
American Shipper’s March cover story covering the NVO industry and its weathering of the financial storm. The feature will include online NVO industry statistics from The Datamyne. The issue will be available online Feb. 23.)
