London-based Drewry has created a product that it says will allow shippers to share information about trends in contract shipping costs.
Drewry said its "Benchmarking Club" service “provides members the opportunity to benchmark their shipping costs against their peers and so aid their freight procurement processes. Member organizations provide their contract rates confidentially to Drewry and in exchange these are aggregated with other members' rates to provide benchmark contract rates based on an average of the submitted rates.
“Presently, there is plenty of visibility on spot rates, via Drewry’s Container Freight Rate Insight and World Container Index for example, but very little on contract rates,” said Philip Damas, director of Drewry Supply Chain Advisors.
“Drewry’s Benchmarking Club will also enable exporters and importers, for the first time, to know the seafreight cost advantage of large shippers relative to medium and small shippers,” he added.
Damas said Drewry has been offering the product since the beginning of 2014, and declined to say how many shippers had signed up for the product, but said they include one of the top three U.S. retailers, as well as a number of international companies from the U.S., Europe, Japan and China. In addition to retailers, there are chemical companies, industrial firms, and manufacturers of fast moving consumer goods companies that are using the product.
While Drewry said the product will include rates from forwarders, it said it will not have forwarders as shipper members of the club.
Damas said he is not aware of any other company in the U.S. offering such a product, but said there was one other firm in Europe doing similar work that he declined to identify.
Damas said that Drewry had discussed the product with the Federal Maritime Commission so that they are aware of it, and that his firm had “taken legal and competition law advice to ensure that we are not running into anything controversial or illegal.”
He said the club is set up so that it would never exceed a maximum market share of around 20-30 percent in any particular region.
“If we reach that, we stop taking new members,” he said.
“Benchmarking is not unique to shipping, there are many benchmarking clubs,” Damas said. “Carriers benchmark their costs, in particular. Shippers benchmark their raw material costs. It is quite common when it is a big part of their spending, when the projects are comparable, it is perfectly good practice to benchmark your costs.”
He said he has had no feedback from carriers since the product was just announced this week.
Chris Koch, the president and chief executive officer of the World Shipping Council, said he was not familiar with the Drewry product," but sad I would assume that a shipper that has agreed to a confidentiality clause in its contract would not violate that commitment. Not all contracts have confidentiality clauses.”
Damas said that in order to protect the confidentiality of contract information, shippers do not provide rates by carrier, but provide anonymized data and no data from individual carriers.
For example, instead of a club member saying it has a contract with Maersk Line to move 10,000 containers at a particular rate, it would instead tell the club “the weighted average by contract rate of carriers A, B and C between port X and port Y.” If there are differences in service levels between carriers, there might be a weighted average for one service versus another, he added, but never by carrier.
Drewry compiles benchmark or average rates for particular sectors and then sends a customized quarterly analysis to individual shippers in each sector. It will also hold webinars for club members on best practices on buying and running tenders seafreight where rates will not be discussed.
Drewry said it will be publishing an index of contract rates across multiple trades on a quarterly basis to improve visibility of trends (but not actual rates) in the contract market.