Ocean Freight Procurement Intelligence Report, 2024 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

Every organization and its procurement team look forward to negotiating the best deal when procuring a set of products or subscribing to services. Rate benchmarking involves price/cost comparison of more than one set of products/services to analyze the most efficient combination that can potentially help the procurement team get the optimum rate.

The geographical location, supply chain complexities, transportation and labor, and size and volume of shipment play a vital factor in analyzing the rate benchmarking of the ocean freight industry. Under geographical location, factors such as distance between the destination and originating ports and proximity to major trade routes can significantly impact shipping rates. Similarly, customs regulations in different countries, specialized handling requirements, and the complexity of cargo handling, such as hazardous materials or perishable goods, may incur additional charges under the supply chain header and further impact freight rates.

For example, ongoing supply chain issues like Houthi missile attacks and Red Sea disturbances have resulted in ships having to change their routes, leading to port congestion and longer lead times. In February 2024, ocean and shipping freight rates surged by 173% on trade lanes from Asia to North Europe, with carriers adding surcharges ranging from USD 500 to 2,700 per container. The Red Sea crisis also negatively impacted Indian shipping rates. In February 2024, containers traveling from Shanghai to Chennai saw a 144% increase in freight costs on specific routes in addition to longer transit times for vessels. On average, shipping freight rates from India to the U.S. and European countries witnessed a 40 to 50% increase across major industries such as pharmaceuticals, textiles, and automotive in January 2024 from September 2023.

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Labor cost is one of the key components of the total cost incurred while offering a product or service. Therefore, an organization must decide whether the focus category should be retained in-house or outsourced if the organization is providing its products or services at competitive prices. If the organization decides in favor of outsourcing, it must understand the difference in the salary structures of suppliers before selecting a supplier and formulating a negotiation strategy.

According to our research, shipping coordinators (operations) at Maersk and Mediterranean Shipping Company receive a 15 - 25% higher base salary compared to the salary received by shipping coordinators (operations) working in companies such as Kerry Logistics Network and Dachser Group SE & Co. KG. However, the year-on-year increment rate in all these companies majorly depends on the Key Result Areas (KRAs).

Organizations may find it cumbersome to track all the latest developments in their supplier landscape continuously. Outsourcing the activities related to gathering intelligence allows organizations to focus on their core offerings. At this juncture, our newsletter service can help organizations stay updated with the latest developments and innovations and subsequently assist in preventing disruptions in the supply chain. We have identified the following developments within the Ocean Freight industry in 2023 and beyond:

• In May 2024, Hapag-Lloyd announced a collaboration agreement with IKEA. As part of Hapag's decarbonization efforts, it plans to reduce emissions from its container shipments originating from Asia. Both companies have agreed to use Hapag’s biofuel product “Ship Green 100” between March 2024 and February 2025. These containers run on biofuel derived from trash and residues rather than traditional marine fuel oil. This move is expected to reduce approximately 100,000 tons of CO2 emissions.

• In April 2024, Maersk docked its second largest methanol-enabled vessel, “Astrid Maersk”, at Shanghai’s Yangshan port. This was done in partnership with Shanghai International Port Group (SIPG) for methanol bunkering with concurrent cargo and bunkering operations in China. The deal plans to enhance and expand methanol-enabled tanker deployment throughout Asia and Europe and promote the transition to a low-carbon economy.

• In October 2023,Maersk announced a strategic partnership with Starlink (Space X). In this deal, Maersk will utilize the latter’s satellite network connection in its fleet operations. Starlink will be used in 330 of Maersk’s ocean fleet/ container ships that will have high-speed internet connection with 200+ Mbps download speed. The deal also includes integrating cloud operations to streamline workflows for improved efficiency. Maersk's main goal is to digitize its vessel operations and improve remote support and vessel inspections. This agreement also strengthens Starlink's presence in the shipping industry, as they already have partnerships with Happag Lloyd and NetTalk Maritime.