News / Shipper consortia one way to avoid volatility and sudden surcharges

Ocean freight shippers looking for more transparent pricing and secure capacity allocation, amid the current volatility, have been exploring alternatives to more traditional methods.

BCO network ShiftX UK is a nine-year-old consortium founded in Germany, shipping up to 7,000 teu a year  and MD and founder Keith Gaskin explained that the attraction for the members to ship their goods under a combined contract was “because they don’t always get direct attention from the carriers”.

“It’s a very different approach. Ocean freight has been around a long time, but our approach is to add a layer of transparency,” he told The Loadstar.

“We have an overarching set of ShiftX contracts, but each contract is associated to your company. So that space is your space.

“If you want 20 teu some weeks, 10 the other, that’s your space, dedicated to you with your name on a contract. You have direct access to the carriers.” he said.

“So that’s very different to the normal world, where a forwarder might say ‘we’ve got you a contract’, but you’re never quite sure if it’s allocated directly to your business.”

In total, ShiftX has over 50,000 teu under long-term contract across six of the major carriers, with more than 4,000 port pairs covered. The BCOs in the consortium can directly access the rates set by a carrier and then pay ShiftX’s management fee.

“So it’s very, very transparent,” said Mr Gaskin. “You pay a subscription fee on an annual basis. You then have a transactional fee per teu to join this cooperative approach. We pull all the teu together for a tender and everyone in the ShiftX cooperative group gets to see all the pricing as we go through the tender process over a two- or three-month period,” he explained.

And unlike having a contract through a forwarder which might play largely on the spot market, the BCO consortium operates solely on a long-term basis – both with the carrier and shipper. This means that the BCO won’t be vulnerable to GRIs or unexpected surcharges.

Mr Gaskin added: “We have a very thorough process before onboarding new clients so that they understand the benefits of our long-term pricing and capacity model. It’s to ensure they align with our strategic approach, rather than looking for a more transactional model.

“So, as to some of these ‘made-up’ surcharges you see floating around, if it’s not agreed in the contract they can’t charge us, and we won’t get a GRI because we’ve got a long-term contract,” he said.

By having access to six different contracts across six different carriers, Mr Gaskin noted that even a BCO with just 500 teu could benefit from multiple services and use blended transit times to mitigate risk.

“Whereas if you just went to one carrier, you have to go with its services. If they’ve got a blank sailing, you could not move anything for a week.”

If a shipper under a ShiftX contract is unable to fulfil their minimum quantity commitment over a prolonged period, they may have to pay a no-show fee, depending on the circumstance, but they won’t have to pay the dead freight costs.

But Mr Gaskin explained that this would not impact ShiftX’s commitment to the carrier, due to the multitude of clients under the contract.

“We might have a client who has a peak here, and a peak there, but then we’ve another that peaks at different times. So, the volume flows through us a lot more consistently. You still get the peak seasons, but [carriers] can get lots more volume through one company,” he said.

He told The Loadstar that amid all the current volatility, this kind of consortium was even more valuable to shippers.

“Volatility plays into our strength. You don’t have any volatility with us because you have a contract set price and we have pre-organised your space for the year,” he concluded.