Ocean freight basics part 2 – Volume forecasting and why it matters for shippers

04.06.2021

 

In part 2 of our series on ocean freight basics, we’ll be covering volume forecasting for ocean freight. Now more than ever, the topic is worth understanding in detail, as ocean freight rates are experiencing record highs. We’ll also examine why ocean freight volume forecasting matters for shippers and shipper-carrier relationships. 

 

What is ocean freight volume forecasting? 

Volume forecasting for ocean freight uses predictive modeling to optimise container supply to shipper demand. The purpose of this activity is: 

A) To plan the capacity required to get loads from origin to destination. Ocean vessels are not elastic and neither is the operation to adjust vessel schedules to meet changes of demand. This requires forecasting. 

B) To monitor disruptive factors (ECA zones, port congestion, weather, geo-political, events like global pandemics) 

Accurate ocean freight volume forecasting is essential to sustainably contracting long term freight rates – indeed it’s probably the most important factor for carriers to calculating the rates.  

 

The current state of the ocean freight market  

The disruptions of COVID-19 continue to make volume forecasting a difficult business, and sustained demand has put a strain on shippers and carriers alike. One need only to look at soaring ocean freight rates for a clear metric. Freight rates are high, container capacity low. 

In such a squeezed market, it can be a further challenge for shippers to negotiate and contract ocean freight based on seasonal volumes (at the time of publication, many shippers will be entering peak season). Regarding the latest signs of the capacity crunch, US retailers are scrambling to secure bookings ahead of the back-to-school season – and even shipments contracted at above-average rates are being rolled.

The return of cancellation and no-show fees for shippers is another sign that demand is overwhelming carriers. Activities like overbooking, phantom-booking, no-shows and cancellations are symptoms of a lack of transparency between shippers and carriers. Ultimately, these practices not only have a muddying effect on ocean freight volume forecasting, they can also degrade shipper-carrier relationships.  

When viewed in concert, the developments mentioned signify a squeezed market, deviating from forecasts because of high demand, and putting shipper-carrier relationships in jeopardy. 

 

Why should shippers care? 

Because shippers are paying higher than ever rates for ocean freight. And, in this context, shipper-carrier relationships are more vital than ever to build and maintain. 

Shippers have long enjoyed a privileged position in accessing ocean freight capacity. In the past, shippers may have been able to get away with overbooking to ensure they acquired  the capacity they needed. But in today’s carrier-centric market, the risks to carrier relationships are no longer worth the reward.  Shippers must now take extra steps in relationship building to ensure they secure capacity at competitive rates.  

 

Shipper-carrier transparency improves relationships and forecasting data 

Shipper-carrier transparency not only improves relationships between the two parties, it also helps improve accuracy in ocean freight forecasting. When shippers and carriers share reliable data, the market gets a better picture of real demand. Everyone wins: relationships improve, and rate forecasting is based on sounder numbers.
  
Transparency, then, is the idea that drives better shipper-carrier relationships and improves ocean freight forecasting. But what enables transparency for shippers?  

 

TenderEasy provides solutions for shippers to increase transparency  

TenderEasy empowers shippers to share their forecasting data with just a few clicks. When data is shared between shippers and carriers, collaboration improves, relationships grow and both sides benefit from more accurate forecasting and planning.   

With TenderEasy, shippers can simulate over- and under-volume scenarios and plan accordingly. Some pursue two-tiered pricing; this kind of scenario-building is much easier with a digital solution that can help you react to ever-changing volume forecasting at speed. 

Shippers using TenderEasy can also exchange ratings with carriers, smoothing the path to becoming a Shipper of Choice, with more privileged access to ocean freight in squeezed markets (for more on this topic, see our previous blog post). 

For more information on how TenderEasy’s solutions can help you build lasting shipper-carrier relationships and easily gain access to carrier capacity, please get in touch.