A better ocean freight settlement system is needed

As shippers, intermediaries and ship owners look ahead a few years to forecast trends in several areas of change, there’s one area that would be smart for everyone to put some effort into—billing accuracy.

First, let’s look at the trends that are making an impact on billing processes at ocean carriers. Most shippers and intermediaries have personally witnessed the chaos of mergers and their impact on customer facing systems in their own firms. This is magnified in ocean carrier firms due to the complexity of the transactions and the international nature of the industry.

Companies can spend years consolidating systems and establishing routine processes for preparing invoices that can be multiple pages of charges for carriage, fuel, port fees, drayage and more. Shippers, meanwhile, are doubly affected when using a third-party provider (3PL), as those intermediaries are going through their own rounds of mergers.

In addition to true mergers, there are the consortia or “alliances.” The alliances can mean a dozen carriers are booked on a single vessel, each capturing information and preparing invoices based half the time on manual report development. Those who process invoices for payment are forced to audit non-uniform invoices—often printed on stacks of paper. This yields error reports that vary between 10% and 50% of billings.

The third trend is security and the requirements that shippers and carriers pre-register, weigh and provide advance notice to multiple parties via electronic means. This assumes a level of sophistication that many shippers and their third-party service providers have been scrambling to put into place. Full integration of all of the data around the transaction is still an aspiration for the parties involved in an international shipment.

The ocean shipping industry has always been paper intensive due to the various parties involved and the multiple steps in this portion of the global supply chain. The forwarder and custom brokerage industries have operated for centuries as facilitators of the complex import/export transactions.

They are experts. However, now there’s an expectation that the experts will be replaced by software.

While there are increasing numbers of standards to write software for, many shippers do not have the applications in the form of a transportation management system (TMS) and related communications systems to operate on a global stage. If they can’t see the rates and costs that make up the ocean shipment, they will not feel comfortable processing invoices without the aid of an expert.

The traditional “match-pay” process requires simple transactions; and, as applications become more attuned to data exchange, there will be more user-friendly products for shippers to use. The significance of all this is that shippers increasingly rely on details of transactional data to model future costs and to prepare for negotiations with service providers.

International shipments are growing as a percent of transactions for many shippers as they explore global markets for customers and suppliers. Shippers have to insist on collecting the data about their inbound and outbound shipments as a pre-requisite of any financial settlement.

That means they need to be able to accept and store such data. It’s now critical that investments in learning, applications and new processes be a top priority for shippers and their 3PL providers. The rapidly changing marketplace for ocean freight will increasingly be tough on the unsophisticated players.