Understanding the ROI of an Ocean Freight Visibility System

Freight visibility is crucial to operating in today’s market. As companies like Amazon continue to push the envelope into what delivery times should look like, shippers need to know where their freight is and when it’s going to arrive at the dock. While there are many ways to go about getting this information, having a dedicated source such as an Ocean Freight Tracking System (OFTS), in many cases, has proven critical. 

Of course, adding a new system, however beneficial it may be, is never a decision to be made lightly. Market saturation alone can make buyers nervous as they must ensure the best fit for their companies needs to justify the initial expense. We here at Ocean Insights have taken the liberty of demonstrating how the strategic use of an OFTS can drive tangible business benefits and, as a result, have a better understanding of how to measure the return on their investment.  

Creating a Real-World Example

In one of our white papers, we’ve created an example use case based on anonymized real-world data. The company being used in our example is a leading global retailer with warehousing, manufacturing, and outlets across the world, as well as an e-commerce operation. 

Because of the scale and global nature of their operation, ocean freight is a critical part of this company’s supply chain. Due to the rise in manufacturing costs and customer’s continuous demand for better experiences at lower prices, the organization needed to ensure that every aspect of its operations was running at peak efficiency. Therefore, our retailer wanted to optimize its supply chain operation. 

The company has identified five key areas it wanted to improve:

  • Free time optimization to reduce demurrage and detention charges: Demurrage and detention revenue is big business for carriers, bringing in over $1 billion in 2018, against $28 billion in annual revenue. For our retailer, the cost of detention and demurrage was high, which means that maintaining it was crucial. In the past, it struggled with managing the free time of its containers at the port of discharge (POD) owing to poor visibility and on-time performance of its shipments. This resulted in fluctuating costs which impacted both margin and inventory management. 
  • Carrier rate negotiation: When it comes to procuring shipping services, evaluating carriers’ performances and understanding market rates are critical. Yet in an industry as historically opaque as ocean freight, it can be a challenge to know what good should look like. For companies such as our retailers with a global manufacturing and storage network, getting accurate and actionable data from all points of the supply chain can be a drawn-out process, while industry data rarely gets more detailed than at a trade level.
  • Inventory management: While its products are not perishable, our retailer is dictated to a degree by seasonal demands, which means both its forecasting and its stored inventory needs to be accurate and reliable all the time. With a distributed manufacturing and storage network, our retailer needed to ensure that deliveries were arriving when expected, and any delays, disruptions were communicated in real-time. A clearer understanding of how often shipments were delayed, and where they were most likely to be delayed, helped the operation to adjust and manage their inventories accordingly.
  • Supply chain and shipping network optimization: Supply chains are complex functions with continually moving parts. At any one-time, multiple factors can be influencing different areas. Having visibility is critical; it is also extremely hard to achieve. For our retailer, ocean freight is just one aspect of its broader supply chain. But even this one function has several elements – different carriers, different Points of Loading (POLs) and Point of Deliveries (PODs), and even different vessels on the same route.
  • The use of employee time to focus efforts on more value-added activities: Ocean cargo tracking has, historically, been a slow and ponderous exercise. It would require the sourcing and collation of multiple data sources of inconsistent quality and reliability, perhaps months old, and then trying to derive actionable intelligence from them. It required time and knowledgeable people who understood what they were looking for. In other words, it was time-consuming, error-prone, and diverted valuable employees from other parts of the business.

The above problem areas aren’t unique to the company used in this example. Most companies will experience at least one, if not all of these pain points in some form or another. Would you like to see how an OFTS can solve these common logistics problems? Curious as to how better ocean supply chain visibility can consistently prove ROI? Would you like a detailed breakdown and analysis of the above? Download the Ocean Insights white paper today and see how your operation could benefit from having an OFTS.