A $500 million problem

Drewry research conducted on behalf of software provider CargoSphere found that forwarders spend about $500 million a year on ocean freight rate acquisition and management.    Freight forwarders spend roughly $500 million a year finding and managing ocean freight rates, according to an analysis conducted by Drewry Supply Chain Advisors and commissioned by the freight rate management software provider CargoSphere.
   Drewry arrived at the estimate after canvassing forwarders of all sizes and measuring the time spent acquiring and managing buy rates from ocean carriers, and extrapolating their findings across the industry. The consultancy’s research assumes there are roughly 50,000 forwarders buying 48.4 million TEUs of ocean freight annually, and that the industry collectively spends 24.4 million hours on this process.
   CargoSphere noted that the $500 million represents ongoing operational costs incurred only by forwarders.
   “It does not include the inefficiencies and costs incurred by the rate originators, ocean carriers, or BCO (beneficial cargo owner) shippers,” CargoSphere said. “Furthermore, it also does not include the cost of system investments to support or reduce labor costs.”
   CargoSphere said it commissioned the research to quantify the inefficiencies they have been working on easing for more than a decade.
   “The cost burden of global ocean freight rate processing is a huge weight on the industry as a whole, one that is not sustainable for global freight forwarders, carriers or BCO shippers,” CargoSphere President Neil Barni said. “This exorbitant cost underscores the need to focus on digitizing all aspects of rate management, networking and distribution, as it is an extremely important business enabler for global ocean shipping.”
   American Shipper reported on the digital challenges faced by the freight forwarding industry in its March cover story.