Shippers urged to rethink container allocation strategies

Eric Johnson, Senior Technology Editor‍

Shippers need to focus on better capacity forecasting, sharing of benefits with carriers, and concentrating volume with fewer partners to navigate what will be a tricky container allocation environment in 2021.

Container allocations refer to the process of divvying up a shipper’s volume among various vessel operators and non-vessel operating common carriers (NVOs) on an annual and more short-term basis. Allocations are built on a mixture of annual contracts — based on projected volume associated with a negotiated rate, also known as minimum quantity commitments (MQCs), and shorter term, ad hoc needs — so they essentially act as ongoing projections for what volume a shipper will send to a specific carrier on a given week.

In a sense, allocation strategy allows a shipper to avoid having the space allocated to them weekly reduced to a non-scientific MQC-divided-by-52-weeks equation.

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The challenge, according to Chris Kirchner, CEO of logistics software provider Slync, is that data resides in systems within multiple parties — the shipper, the logistics services provider, and the carrier — and in both structured and unstructured formats.

“This makes it very difficult to get a[n] accurate picture of what is going on, and what needs to be done at various points in the allocation process,” Kirchner said. “The operational challenge is that allocation is a fluid situation taking place around the world on a continuous basis. It relies on carrier confirmations that can fluctuate, especially in today's environment, and requires a lot of human attention in most operations.”

This article was originally posted by the Journal of Commerce. To continue reading, visit JOC.com.