September 16, 2024
2
min. read
Optimizing Ocean Shipping for the Peak Season with Carrier Allocation Management
As the festive season slowly approaches, children and adults alike buzz with excitement while supply chains start facing higher pressure. In fact, even though the winter festivities are months away, shippers and manufacturers worldwide start bracing in the heat of summer, for the annual surge in demand and the resulting challenges, and this year the peak season started even earlier than usual. Therefore, in this period, marked by volatility and high stakes, effective ocean freight management becomes crucial to ensure timely deliveries and successful cost management.
This blog post explores some of the major supply chain challenges faced during the peak season, before the winter holidays and looks at how improving ocean freight shipping operations is key to navigate these turbulent waters.
The Peak Season Shipping Surge: Challenges for Shippers
The months leading up to the winter celebrations witness a dramatic spike in consumer demand. Consequently, retailers increase their inventories to ensure off-the-shelves availability, eager to capitalize on the holiday shopping craze. All this does not come without its repercussions. This surge puts immense pressure on supply chains, especially on ocean freight shipping, which is responsible for transporting a big part of the goods across international borders.
This year, higher demand led to 800 000 TEU being shipped from China to North Europe in June 2024 - the highest ever monthly figure on this trade (Source: Xeneta, Container Trades Statistics)1.
This increased shipping demand creates significant ocean freight transport challenges:
- Capacity & Equipment Constraints: The sudden increase in demand often outstrips available shipping capacity. This leads to overbooked vessels, port congestion, and longer transit times. Additionally, equipment constraints, such as a shortage of containers or chassis, exacerbate the situation, further delaying shipments and complicating logistics.
- Cost Fluctuations: Freight rates typically soar during peak seasons, driven by the high demand for shipping space. This volatility can wreak havoc on budgets if not managed effectively. As a matter of fact, “The global freight rate has significantly increased, hitting over 5,900 U.S. dollars in July 2024, the highest value since January 2023”2
- Inventory Management: Balancing inventory levels to meet customer demand without overstocking is a delicate task. Misjudging this balance can result in either stockouts or excess inventory, both of which carry significant costs.
Understanding Ocean Freight Allocation Management
Ocean freight transport, while just one component of the entire supply chain, does have a substantial impact on a company's P&L. Efficiently managing these costs while maintaining top-notch service quality is not just good practice—it's a critical business advantage. Effective management of ocean freight can drive top-line growth by optimizing shipping processes and enhancing supply chain efficiency. This, in turn, supports increased revenue and market responsiveness.
Additionally, effective allocation management is essential for continuous optimization, regardless of market conditions.
At its core, Ocean Freight Allocation Management needs to address:
- Underutilization and Overutilization: Inefficiencies in these directions lead to increased costs and delays. Underutilization impacts carrier relationships. Overutilization leads to booking rejections and increased costs.
And it involves:
- Building Resilience: Tools and strategies that help maintain resilience in the face of sudden market changes are crucial. This includes building strong relationships with transportation partners and selecting optimal trade lanes.
- Continuous Optimization: Ensuring accurate cargo space allocation and compliance with carrier allocations is vital to avoid the pitfalls of both underutilization and overutilization.
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Logward’s Solution: Ocean Freight Allocation Management. Executed.
Logward's Allocation Management is a comprehensive solution to the challenges of ocean freight logistics, particularly during high-demand periods like the pre-Christmas season.
Here's what Logward brings:
- Holistic Integration: Logward's Allocation Management integrates with adjacent logistics processes, providing a holistic approach that enhances overall performance. This integration helps reduce transit times, minimize transportation costs, and improve delivery reliability.
- Data-Driven Insights: Through performance monitoring shippers make informed decisions with reduced error risk, improving allocation strategies and transport planning.
- Timely Resource Identification: Logward enables the prompt identification of available transport resources to meet freight transport demands, crucial during peak seasons.
- Maximized Utilization: The solution informs about optimal booking practices in accordance with tender commitments, maximizing the utilization of available capacities.
Logward's Ocean Freight Allocation Management: Key Features
- Ocean freight RFP Award and Booking File: The journey begins with an optimized Request for Proposal (RFP) and booking file process, ensuring that initial allocations are strategically sound.
- Allocation Management Dashboard: A dashboard provides a retrospective view of actual allocation adherence.
- Transport Planner: Receive balanced booking recommendations in Logward or your TMS based on the award file, the open allocation as well as the appropriate carrier schedule.
- Monthly Allocation Digest: It identifies discrepancies in the rating and routing guide, pointing out gaps and opportunities for optimization. It provides precise booking recommendations.
- Performance review and feedback cycle
- Corrective Actions: Continuous improvement is supported by RFP Optimization and Optimized Transport Planning, ensuring that strategies evolve with changing market conditions.
Conclusion: Stress-Free Shipping for Holiday Season Success
For shippers, the months before the Winter celebrations are a period of high stakes and high stress. Effective ocean freight capacity allocation management makes the difference between a smooth, profitable season and one fraught with delays and excessive costs. By leveraging Logward's comprehensive Allocation Management approach, shippers navigate the complexities of this critical period with confidence.
Logward's data-driven, integrated solution ensures that shippers not only meet demand efficiently but also maintain cost-effectiveness, ultimately delivering a stress-free holiday season for their customers too.
Try Logward’s user-friendly ROI Calculator to evaluate for free your top-line improvement within the first 12 months of using Logward's Carrier Allocation Management & Monitoring solution.
Additional Resources
- Webinar: Allocation Management: Navigating Between Operational Excellence and Logistical Purchasing Decisions (in German)
- Case Study: How to Ensure Your Cargo Arrives on Time by Managing Your Transport Capacities Transparently
- Press Article: Successful Fulfillment: How Companies Minimize Costs and Risks with Agile Supply Chain Solutions While Ensuring Delivery Reliability (in German)
- Book a Demo: Schedule a Demo with Our Experts