Rates Matter Most
Reliability ranks second in survey of shippers’ criteria for carriers
by Bill Armbruster, blog anchor
Last month we did a survey asking what matters most to shippers when they choose an ocean carrier. Rates ranked as the top priority, garnering 41% of the votes, followed by reliability with 29%, and vessel space with 21%.
Rates and vessel space tied as the second most important factor.
Shippers accounted for 18 of the 34 respondents, with another 10 identifying themselves as forwarders or NVOs.
I’m not surprised by the results, although I suspect they would have been different if we had conducted this survey a year ago. One respondent put it this way: “Each shipper’s opinion will vary over time.” Indeed. A year ago some shippers might have said that the rate didn’t matter as long as they could find a container and get it on a ship – even if they felt they were being blackmailed into paying “emergency” surcharges.
As the space and equipment shortages eased by mid-year, they no longer dominated shippers’ concerns as much as they had last winter.
“Space was the most important issue then. Customers were willing to pay more for space, and now that’s kind of flipped around,” said Bryan Jay, vice president of JCI Logistics, a Port Washington, N.Y.-based NVO.
That’s why Jay said he listed rates as his top criteria, followed by space availability and equipment availability.
Klaus Schnede, marine procurement manager for Eastman Chemical Co., picked vessel space as his top choice. “We have to make sure we get our product moving,” he told me in an interview. Schnede said rates are his second most important consideration, adding that more and more carriers are willing to accommodate shippers on rates.
While none of the respondents chose equipment availability as the most important factor, 24 percent ranked it second, and 21 percent put it in third place.
Many of the responses closely linked two or more factors. “Most of our customers are looking for reliability first, and rates second,” one forwarder wrote. But, the forwarder added, “However, on occasion, we have customers that just want the cheapest rates.”
Another forwarder linked rates with transit time: “All my customers, without exception, are looking for the fastest transit time at the lowest rate.” This person also took a jab at the carriers: “Plenty of vessel space and equipment availability at all times is another, although ludicrous, expectation,” he wrote.
Bob Weiss, president of the Food Shippers Association of North America, noted that the list of choices on the survey did not include vessel transit time and arrival, adding that these criteria are especially important for reefer shippers. I agree, although these factors could be incorporated into the category of reliability.
Ten participants listed customer service among their top three criteria. “You cannot do business with someone who doesn’t provide good customer service, whether for booking, documentation, good communication and understanding of the business,” Schnede told me.
Another survey participant wrote: “Shippers also want a carrier point person (sales person) who is professional, knowledgeable and responsive.”
The sales representative is often the only person at a carrier that shippers know, and it’s natural that shippers want to be able to contact the sales rep when they have a problem – and to help find a solution. It sure beats dealing with a customer service representative with little or no industry expertise and who is totally unknown to carrier management.
The last five criteria listed in the survey – transparency, value-added logistics, routes, ports, and frequency – drew only a few responses. It could, however, be that participants took some of them as a given. For example, an exporter to a region with relatively little service, such as the Middle East, has very limited options when it comes to choosing a carrier.
On routes served by a lot of carriers, such as Asia to the West Coast, rates are still king. But reliability, vessel space, equipment availability, and customer service are also very important. Or, to put it bluntly, price doesn’t matter if the service stinks.
Click here to see the survey results. Next, I’ll be asking carriers for their comments.
About Bill Armbruster
Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected].
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.
Date posted: January 3, 2011