In January Goldman Sachs invested $500 million in social media phenomenon Facebook giving the company a staggering $50 billion market valuation. That's a lot of money for what amounts to a simple concept ' allow individuals and organizations to share and consume information with an online community they create or 'friend.'
It's safe to assume Chapel Hill, N.C.-based CargoSphere is considerably smaller than Facebook, but the vision the company has pursued with the non-vessel-operating common carrier industry is not all that different.
'Clients get a CargoSphere system and create their own confidential rate sharing network with trusted parties,' said CargoSphere President and Co-founder Neil Barni, in an interview. 'Each company designates the companies with whom they would like to collaborate through a process of mutual authorization.' CargoSphere's system offers an invitation tool similar in concept to Facebook's 'friending' feature.
CargoSphere was started in 2000 to provide rate management systems to the NVO community. Today the company has close to 150 customers using its rate-sharing network, which accounts for about 4.5 million rates being shared at any given time. 'Rates can be shared in a one-way fashion or reciprocally,' Barni said. 'This is not a portal with a single hub and spokes, but a technology platform which enables each client to create its own private network and each network may have overlapping parties.
'Receiving rates in the form of static files such as Word, Excel or PDFs, which are immediately obsolete once received, is no longer adequate in a highly competitive and fast-moving transportation environment,' he added. 'Not only do NVOs still receive such files directly from carriers, but also from neutral NVOs and a global network of agent partners.'
NVOs access CargoSphere's rate-sharing tools via a subscription model that charges per person using the system. Small customers could have just a single user while larger customers have as many as several hundred users. In addition to NVOs of all sizes, the company also provides rate-sharing systems to shippers' associations organized by the National Customs Brokers and Freight Forwarders Association of America and the World Cargo Alliance.
|'This is not a portal with a single hub and spokes, but a technology platform which enables each client to create its own private network.'|
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Online rate sharing can provide a unique value to any NVO. Small NVOs can provide a scope of services far greater than previously accessible by tapping into their partners' network as need dictates. Mega-NVOs should see this network as a sales channel that allows them to present their rates to many smaller NVOs in real time. 'It has become a business imperative for (NVOs) to have access to a more comprehensive rate database to meet the demands of global shippers,' Barni said. 'They simply need more coverage and associated rates, but can't go out and negotiate with carriers in every trade lane oftentimes for smaller volumes. Even larger intermediaries tend to focus on core trade lanes and partner elsewhere.'
Those companies that fit somewhere in between small and mega-NVOs can realize both sides of the value proposition.
'Many large consolidators now communicate their sell rates to me via CargoSphere, eliminating lots of paperwork,' said Peter Porse, executive vice president of ClearFreight. The NVO accesses 41 contracts shared by their partners and shares 16 of its own contracts.
'It is critical we develop more business with our trusted partners,' said Pat Fosberry, corporate export and transportation manager for mid-sized NVO John S. James Co. 'Mutually sharing rates has helped us increase our transportation volume, but more importantly, our ability to offer diverse services to our clients.'
'We are strengthening relationships which may otherwise falter,' Barni said. 'Easy access to real-time rates makes them far easier to use, especially when you can see both current and future rates with visibility of upcoming GRI and surcharge changes.'
In addition to rate sharing, CargoSphere's systems allow NVOs to conduct online negotiations, manage ocean and air carrier rates, create interactive branded quotes and large-scale quote packages, self-publish tariffs with the U.S. Federal Maritime Commission, and take advantage of the upcoming exemption for U.S. licensed NVOs.
CargoSphere faces the same challenge that any IT vendor marketing to the NVO community ' right or wrong NVOs tend to believe they can develop IT more effectively in-house. While the merit of this approach is debatable, it is difficult, if not impossible, to support this approach to develop systems that are inherently external and collaborative. Whether it's CargoSphere's network or some other means, NVOs who want to share rates with partners need a neutral platform to facilitate that process.
It's not hard to assume that all this collaboration around rate management will put further pressure on carrier pricing and, as a result, carriers will resist adopting similar technology. However, Barni sees a value proposition for carriers in terms of efficiency that could supersede those concerns.
'Our architecture will allow carriers to apply BAF and GRI changes across several thousand contracts at once in just minutes,' Barni explained. 'These updates could then be immediately visible in the systems of the contract owners, which would drive enormous efficiency gains in the industry.'
For example, 'CargoSphere is helping Econocaribe and CaroTrans to consolidate their LCL (less-than-containerload) carrier-to-carrier agreements in a single system, while gaining the ability to push those rates confidentially to global partners across our (rate sharing network),' Barni said. This same benefit could easily be extended to asset-operating carriers facing the same challenge of communicating frequent pricing changes to thousands of customers in a manageable way.
Like any other community-based system the value provided to users increases with every addition to the network. Bringing new customers on board quickly and efficiently is crucial to the network's success.
'Clients are usually fully operational in a matter of days or weeks,' Barni said. 'Clients also find that they can connect with their partners in short order.'