Recent disruption across global supply chains has exposed uncomfortable questions about how freight forwarders and carriers wield their power over shippers, according to the president of the Global Shippers Association (GSA), Mark Chadwick.
GSA’s Failed Consensus Effort on Forwarder Surcharges
The GSA negotiates freight contracts on behalf of around 25 major shippers representing approximately $5bn in annual logistics spend. Speaking to The Loadstar on the sidelines of TIACA’s Executive Forum, Mr Chadwick said: “Lots of our members were getting frustrated having to do so many spot rates, so they said ‘could we help by maybe agreeing a surcharge based on different origin pairs and try and get some consensus from the forwarders around those charges?’.”
“So, we asked them to let us know where would they need extra money and how much it would be on these different trade pair combinations,” he explained.
However, Mr Chadwick revealed that, for the same tradelane combination, some forwarders were asking for “zero assistance”, while others wanted substantially more.
“The worst case was a 250% increase,” he said. “I mean, it was ridiculous, all the disparity across forwarders was so much we had to abandon the whole thing. There’s no way we’d get any consensus, and so we just say to the GSA members, ‘sorry, you have to keep spot voting and just handle it ad hoc, because we’re not going to get anyone to coalesce around these numbers’.”
He added: “Because some people were asking for nothing, so why would we say, ‘oh, here you go, because somebody else asked for 200% we’ll give you 20%’.”
“Even Europe to Europe. We don’t have many Europe to Europe airfreight lanes, but we do have some. They were asking for, I think, like 75% increase, and this is on top of fuel surcharge that we give them. It’s not like this is just fuel, we’re already giving them fuel, this was like war-risk market gyration kind of money,” he said.
Exploitation Amid Disruption?
The experience has left some shippers questioning whether parts of the forwarding industry are taking advantage of their position during periods of market disruption. Mr Chadwick said some providers appeared to be treating the crisis as an opportunity to boost margins, rather than recover genuine costs.
“It was just like a couple were trying to make the year on a couple of months,” he said. “We were offering support to partners and completely been taken advantage of.”
Contrast with Ocean Carriers’ Conduct
Mr Chadwick revealed that a similar scheme during Covid yielded positive results.
“We were able to get the forwarders to coalesce around numbers, and we’d revised them every month. We had pretty good alignment,” he explained.
He also added that, from his perspective, the ocean carriers’ opportunistic behaviour hadn’t been as bad as he’d seen from major forwarders.
“Some of the ocean carriers haven’t hit us with any [surcharges] outside of fuel, any war-risk, unless you go into the region itself,” he said. Although he acknowledged there was “some opportunism” among carriers, he added that “it’s not as scandalous as with some of these forwarders”.
Mr Chadwick explained that market fundamentals may be restraining carrier behaviour. With container shipping demand relatively weak and capacity plentiful, carriers risk damaging long-term customer relationships by imposing excessive charges.
“I think it’s because they know once this is over that the market dynamics are still there, that demand is down, capacity is up,” he said. “If they really stick it to the shippers now, they might make some extra money in the short term, but it’s going to really bite them afterwards.”
By contrast, he suggested some freight forwarders had been “a little bit more cavalier”.
Source: The Loadstar
Compiled from international media by the SCI.AI editorial team.
