Ocean freight contracts: How data steers one shipper’s approach

When it comes to contract negotiations, some shippers are leveraging data to achieve the best outcomes for their ocean freight operations.

With a strong data foundation, “it just enables us to have that clear picture and reshape the discussions with the carriers, our partners,” Matt McMahon, director of consulting at Bluspark, said during a session at TPM26 by S&P Global.

Bluspark, an ocean freight consulting and technology company, is working with Emser Tile as the tile company prioritizes transparency when procuring ocean freight services, especially as disruptions continue to wreak supply chain havoc.

There’s been plenty of volatility in the market over the last few years, from the pandemic, the Red Sea crisis and most recently the closure of the Strait of Hormuz. These disruptions to the freight market have led to higher freight rates, port congestion and uncertainty on what to expect next.

As a result, shippers are looking for ways to mitigate disruptions in their supply chains. One way is to leverage data in their ocean freight contracts. Certain data points can help deliver results on carrier performance, show how multi-dimensional data connects procurement and operations, and enable strategic collaboration.

Shippers like Emser Tile are not only looking at cost but also at performance to help drive decisions about what they need for their freight services.

“They want reassurance that their freight is going to move consistently,” said Rick Jordon, a senior managing director at FTI Consulting. “Having freight rolled hurts their ability to have consistent flows,” he told Supply Chain Dive in an email.

With performance in mind, Mark Seal, chief supply chain officer at Emser Tile, discussed his data-driven approach to ocean contracts at the TPM26 conference back in March.

“I’m the last guy in the chain of construction, so it’s super important for us to get the product delivered on time and so forth,” Seal said.

With current market uncertainty, timelines and transit times keep extending. Seal, working with McMahon at Bluspark, is taking a multi-dimensional approach to data to understand the metrics that define how ocean freight should be procured.

“We talked about [rates], talked about performance and carrier and what were the various lens we wanted to have containers moving,” Seal said. “But now, through this program we’re working with Matt, we’re going to have really [a] multi-dimensional look,” he added.

In a multi-dimensional view, Seal can observe what vessel string Emser Tile cargo is on. He is also looking at what terminal its cargo is going into and using data to obtain a performance overview of a designated port.

Speed is important for Emser Tile because the organization is inventory-intensive, Seal added, so working with the carrier to identify the best lanes to increase speed is a major priority.

Obtaining multi-dimensional data also helps the tile company get more effective landing costs when deciding to make a sourcing shift, Seal said, which is why accurate data is crucial.

“We could decide to move from Vietnam to Turkey based on what the landed cost is, because pennies add up and the cost of time,” he said. The data can help the Emser Tile product development team build greater accuracy and confidence in where they should be sourcing on an ongoing basis.

Seal said the company has already started talking to some carriers about certain data points to “not necessarily try to penalize carriers, but really dial into how do we strategically work together.”

These talks help build good working relationships.

“Creating a good working relationship is everything,” Jordon told Supply Chain Dive in an interview. “One has the handle, one has the barrel. Barrel always hurts and I think finding that middle ground is always the better route, and that’s what we at least advise.”