Shippers will define future of NVOs

By Chris Gillis

   Liner carriers and many large shipper logistics executives once made a sport out of talking down to the non-vessel-operating common carrier industry. 
   Twenty to 30 years ago, that rhetoric was warranted, especially when the NVO business was still in its infancy and struggling for validation among shippers and liner carriers. Many of these early operators viewed NVO services as a quick way to make a dollar, and then crashed and burned miserably through their own mismanagement and customer service failures.
   Today, some NVOs, particularly the large pure consolidators and freight forwarder-affiliated operators, have proven themselves to be highly professional operations with a legitimate place in international ocean freight transportation. American shippers, including some of the biggest, have come to recognize the NVO’s value within their global supply chains. 
   Most liner carriers begrudgingly admit NVOs are useful at selling container space to small and mid-sized shippers, allowing them to concentrate internal sales activities on large shipper traffic. But the facts are the NVOs aren’t going away.
   When the recession began to take its toll on the shipping industry, many NVOs proved themselves as valued transporters of cargo by scraping together limited container capacity as liner carriers laid up ships across the major trades. At the same time, shippers experienced shrinking freight volumes that left them unable to commit to traditional service contracts with the liner carriers on some trade lanes. The NVOs offered an alternative with their ability to play the ocean freight spot market for the best rates and service. 
   Also at this time, the major NVOs collectively invested tens of millions of dollars into information technology to improve operations and customer interfaces. Some displaced liner carrier personnel found their way into the NVO community, offering increased expertise to this industry.
   In addition, many shippers that were given top-notch customer service during those dark days of the recession have continued to feed some of their freight to NVOs as overall volumes increased in 2010 and 2011 and they were back at the table negotiating service contracts with the liner carriers. Associate Editor Eric Johnson reports in this issue of American Shipper (pages 25-27) that NVOs handled nearly 25 percent of U.S. inbound volumes over the past two years. With liner carriers facing down a tough financial year and wrestling with service changes, the NVOs will likely hold the line on volumes in 2012. 
   However, the NVOs will do themselves a significant disservice by resting on their recent successes. They must now grapple with what they should become in the future. Is it enough to just consolidate containers and live off the margins between wholesale and retail pricing? We don’t think so. Shippers, with their ever-increasing logistics demands, will redefine the NVO industry. Those NVOs that embrace these changes will grow and prosper, while those that don’t will remain marginal or simply disappear.