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If you are in the shipping industry, you’ve likely encountered various parties involved in transporting your goods, such as mainline operators, Freight Forwarders, feeders, and possibly an NVOCC. As a regular exporter or shipper, you might not have paid much attention to them because all these decisions would have been taken care of by your freight forwarder. However, understanding NVOCCs could reveal significant opportunities for exporters to cut costs. Let’s explore what an NVOCC is and how an exporter can utilise them in their logistics strategy to save money.
To understand the role of an NVOCC, we need to have an understanding about other players in the logistics industry and their functions.
First, let’s start with the big gun, Main Line Operators (MLOs). These are major companies like Evergreen and Hapag-Lloyd that own container vessels (a term for container ships) and containers. The most important document, the Bill of Lading, is provided by the MLOs.
Next are feeder ships. These are smaller vessels similar to mainliners. They operate on routes that large mainline ships cannot reach or dock at. Essentially, supplement the routes of mainliners i.e. they “feed” the mainline ships with containers from smaller ports, which is how they got their name.
Next, comes NVOCCs. NVOCC stands for Non-Vessel Operating Common Carriers. True to their name, NVOCCs do not own vessels but operate similarly to mainline operators. They rent container space from MLOs and sell it to freight forwarders, exporters, and importers. They act as an intermediary between the mainliners and shippers. NVOCCs provide their own Bill of Lading to their clients, partially bearing the risks of mainliners.
Finally let’s discuss freight forwarders. Freight forwarders are experts with a deep understanding of the shipping industry. They don’t own containers or vessels but have all the necessary connections to move your product from point A to point B. They act on your behalf for taking the right logistics decisions for your shipments.
These are the basic stakeholders involved in shipping your goods.
Now, you might wonder, what’s in it for you as an exporter? Why should you care about these details? Well, understanding these dynamics not only gives you insight into the shipping industry but also helps you plan your shipments better and save costs. Let’s delve into the details.
Typically, exporters start by approaching a freight forwarder. Freight forwarders are useful for many reasons: they suggest the best shipping routes, negotiate better deals for container space, handle paperwork, arrange container trucks for loading cargo from your warehouse to the port, and more. While their services are valuable, they come with an added cost. Most exporters find their services satisfactory and prefer not to delve into the complexities of logistics.
But for seasoned exporters who regularly ship to the same destinations, the role of a freight forwarder might become redundant. If this is the case, you can bypass the freight forwarder and choose between booking container space directly with an MLO or through an NVOCC. While booking with an MLO is theoretically more reliable as they are bigger organisations, MLOs often operate only on major routes and might not cover smaller ports. An NVOCC, however, offers more flexibility by maintaining connections with both mainline and feeder ships, allowing you to plan shipments to a wider range of destinations.
As previously mentioned, there are significant cost advantages to using an NVOCC. By eliminating the freight forwarder, you cut out the middleman and reduce additional costs. Also, since, NVOCCs consolidate cargo from multiple exporters and freight forwarders, they have superior negotiating power with MLOs for container space. These savings are often passed on to shippers to maintain trust and good relationships. Additionally, NVOCCs accept LCLs (Less than Container Loads), where they consolidate goods from different shippers into a single container, optimising costs for smaller shipments. They also offer advanced services such as shipment tracking, 24/7 customer service, and cargo insurance making your shipments more secure during the transit.
To conclude, by carefully evaluating their shipping needs and exploring the potential benefits of direct engagement with NVOCCs, exporters can make informed decisions to optimize their logistics operations. While working with a freight forwarder offers convenience, collaborating with an NVOCC can lead to cost reductions, increased control, and access to a wider range of shipping options. Ultimately, the choice between the two depends on an exporter’s specific requirements and business goals.
