Ocean Freight Procurement Intelligence

A critical component of global supply chain management is ocean freight procurement. The global market size was estimated at USD 75.8 billion in 2023. The rise in the coordination of logistics and the acquisition of goods or services from suppliers, including vessel chartering, container ships, cargo handling equipment, and other essential items, for prompt and cost-effective product delivery has shaped the dynamics of the maritime supply chain.

Two of the top technological trends in the maritime and shipping industry are the introduction of smart containers and the increasing use of sensor technology. These technological advancements are having a positive impact on supply chain operations in the face of multiple disruptions in the world. Smart containers are now used in conjunction with IoT sensors to provide better supply chain visibility in this category. For instance, Hapag Lloyd utilizes IoT devices from Nexxiot and Orbcromm to offer data on container or shipment levels on their proprietary platforms. In 2024, according to industry experts, 23 -26% of containers globally are expected to be equipped with IoT devices by the end of 2026.

The maritime freight sector is taking major steps in exploring several sustainable options for the industry. Ocean freight was responsible for transporting nearly 80% of the global trade volume as of May 2024. Shipping companies /ocean freight service providers are increasingly focusing on comprehensive reports of their scope 1, 2, and 3 emissions and working to reduce them. This can be attributed to the increased IMO's CII regulations, coupled with the high sustainability awareness among companies. As of March 2024, the shipping industry contributed 2-3% of the world's greenhouse gas emissions. In 2023, Forbes estimates noted that a 10% reduction in cruising speed can drop fuel usage by almost 30%. Smart indicators are helping companies to weigh the containers properly to avoid cargo spoilage and damage. Alternative fuels, such as biofuels and hydrogen, are increasingly being adopted by shipping companies to minimize environmental impact.

Order your copy of the Ocean Freight category procurement intelligence report 2024-2030, published by Grand View Research, to get more details regarding day one, quick wins, portfolio analysis, key negotiation strategies of key suppliers, and low-cost/best-cost sourcing analysis

This fragmented industry comprises a diverse array of players, encompassing feeders, LNG and tankers, containers, river transportation, bulkers, and long ocean runners. Each of these entities operates within distinct business verticals or cross sectors, each characterized by its own set of operations. Companies are increasingly expanding their service product portfolio, launching new facilities in strategic locations, and integrating new technologies to meet their customers’ demands better.

The total cost of ownership (TCO) for an ocean freight service provider includes the cost of cargo ships/mega-ships, fuel and surcharges, port, demurrage and detention charges, labor, customs clearance charges, terminal handling costs, insurance and ancillary charges. Many factors can influence freight rates, including the distance between origin and destination ports, size and weight of cargo, type of cargo shipped, full container load or less than container load, and market conditions.

For this category, low-cost country sourcing entails taking advantage of the benefits provided by countries with competitive shipping rates, well-functioning port facilities, and other factors that support cost-efficient marine transportation. For instance, nations having robust and integrated port infrastructure can efficiently handle large cargo volumes, thereby helping reduce the handling charges and transit times. Ports having automated technology with modern equipment can streamline the flow of products, minimize delays, and save costs. A few instances of nations that can be considered strategic hubs or locations ideal for shipping routes to gain wide market access include China, India, Singapore, Thailand, and Mexico.

The marine infrastructure in China is well-developed, with major ports such as Shanghai, Shenzhen, Ningbo-Zhoushan, and Guangzhou. The Asian giant is also one of the largest shipping container exporters in the world. It provides competitive shipping rates and a diverse selection of transportation alternatives, making it a desirable place for ocean freight sourcing. Similarly, with its long coastline and strategic location, India has several major ports, such as Mundra Port, Nhava Sheva (Jawaharlal Nehru Port or JNPT), Chennai Port, and Syama Prasad Mookerjee Port (formerly Kolkata Port). These places serve as crucial hubs for maritime trade. Competitive rates for shipping can be offered for shipments to and from Asia, Europe, and the Middle East.

Ocean Freight Sourcing Intelligence Highlights

• The market is fragmented. There is intense competitive rivalry between different carriers and shipping operators. This industry often faces the problem of overcapacity, where supply exceeds demand. Despite being under a contract with a carrier, a shipper or forwarder may resell capacity at a higher rate than the initial contract, which, in turn, leads to intense price competition.
• Three main ocean alliances dominate this ocean freight/maritime shipping industry. These are 2M, Ocean, and THE. These players command a higher negotiating power as they have access to and can provide a broader range of services across major trade routes.
• Bunker fuel, which is a primary fuel for ships, is a significant cost component in the TCO. Fluctuations in oil prices can directly impact the bunker fuel costs.
• During the procurement of this category services, companies/clients evaluate suppliers to determine if they can provide various container options based on the type of goods being shipped. They also assess whether suppliers can offer specialized equipment for perishable or temperature-sensitive products and accommodate oversized cargo.

List of Key Suppliers

• Mediterranean Shipping Company (MSC)
• A.P. Moller - Maersk
• CMA CGM Group
• China COSCO Shipping Corporation Limited
• Hapag-Lloyd AG
• DB Schenker AG
• DSV A/S
• Hellmann Worldwide Logistics Inc.
• Nippon Express Co., Ltd
• DHL Group
• Kuehne + Nagel International AG
• C.H. Robinson Worldwide, Inc.
• Kerry Logistics Network Limited
• Dachser Group SE & Co. KG
• GEODIS S.A

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Ocean Freight Procurement Intelligence Report Scope

• Ocean Freight Category Growth Rate : CAGR of 4.8% from 2024 to 2030

• Pricing Growth Outlook : 10 - 22% (Annually)

• Pricing Models : Volume-based, ad-valorem pricing, flat or fixed rates, spot or contract rate pricing models

• Supplier Selection Scope : Cost and pricing, past engagements, productivity, geographical presence

• Supplier Selection Criteria : Cargo handling capacities, FCL or LCL, cargo insurance, temperature control capabilities, online tracking, technical specifications, and other operational and functional capabilities

• Report Coverage : Revenue forecast, supplier ranking, supplier positioning matrix, emerging technology, pricing models, cost structure, competitive landscape, growth factors, trends, engagement, and operating model

Brief about Pipeline by Grand View Research:

A smart and effective supply chain is essential for growth in any organization. Pipeline division at Grand View Research provides detailed insights on every aspect of supply chain, which helps in efficient procurement decisions.

Our services include (not limited to):

• Market Intelligence involving – market size and forecast, growth factors, and driving trends
• Price and Cost Intelligence – pricing models adopted for the category, total cost of ownerships
• Supplier Intelligence – rich insight on supplier landscape, and identifies suppliers who are dominating, emerging, lounging, and specializing
• Sourcing / Procurement Intelligence – best practices followed in the industry, identifying standard KPIs and SLAs, peer analysis, negotiation strategies to be utilized with the suppliers, and best suited countries for sourcing to minimize supply chain disruptions