With 20 years in ocean freight and international shipping, I’ve seen many disruptions, but none compare to the global impact of Covid. Pandemic-induced issues transformed supply chains, and Non-Vessel Operating Common Carriers (NVOCCs) have become increasingly crucial in maintaining the service levels that carriers have been lacking.
The Value of NVOCCs in the Post-Covid World
NVOCCs were important for small and medium businesses needing flexible shipping solutions and to have access the rates and services. But Covid pushed the industry to its limits. In 2020, global container traffic fell 8.5%, while demand surged due to e-commerce growth, causing bottlenecks.
Before Covid, freight rates were stable and shipping capacity was reliable, with 70% of ships arriving on time.
However, post-pandemic, freight rates skyrocketed, reaching over $20,000 on some routes. Schedule reliability plummeted to just 34% in 2021. NVOCCs have now become essential for small and medium companies as major carriers prioritize large-volume shippers. With more customized services and flexible solutions, as they have access to various carrier options, NVOCCs in general have been better in addressing and dealing with small to mid-size importers.
Below are some of the advantages of working with a freight forwarder and NVOCC.
1. Agility:
Quicker reactions to potential disruptions, offering shippers alternatives to avoid bottlenecks.
2. Technology-Driven Solutions:
Leveraging digital platforms, many companies are now offering advanced tracking, real-time data visibility, and automated booking systems, enabling shippers to make informed decisions.
3. Data Accuracy and Flexibility:
The demand for real-time information has been increasing in the shipping industry which was the slowest to embrace the change. This is better addressed with NVOCCs in general.
4. End-to-End Service:
Although few ocean carriers are attempting to offer end-to-end solutions from trucking to brokerage, in real-world applications, they still face many issues.
5. Personalized Service:
As major carriers focus on large clients, NVOCCs offer small to mid-size companies reliable, personalized service by leveraging relationships with multiple carriers.
BCOs vs. NVOCCs
The rise of technology and transparency has given small to mid-sized importers direct access to BCO (Beneficial Cargo Owner) contracts with carriers. These contracts can sometimes be more competitive than NVOCC offerings, but the level of day-to-day service required is a different story.
During this year’s Trans-Pacific contract negotiations, before the ongoing market interruptions, carriers planned to increase contracts with BCOs and reduce NVOCC space. This shift surprised many, given the support NVOCCs provide and the added workload carriers would face with more direct BCO contracts.
However, as geopolitical tensions in the Middle East escalated, many companies that signed direct contracts quickly faced challenges. Longer voyages, equipment shortages, and space constraints drove BCOs to the spot market, paying premiums and facing volatile rates. Automation, lean management practices, and centralized decision-making by carriers have also impacted service levels, information accuracy, and responsiveness to customer needs.
There is growing interests from many BCOs who are now taking a hybrid approach, using carrier contracts as much as possible but turning to the spot market when contract allocations are fulfilled. This approach can increase the workload, particularly for smaller companies, who often still rely on NVOCCs to manage contracts, handle bookings, and maintain visibility. The role of NVOCCs remains crucial for ensuring service quality and addressing ongoing market uncertainties and I foresee this trend will keep growing in the future as a result of diminishing customer service quality of larger ocean carriers.
