If your organization ships a lot of freight, it may be difficult to search through your freight rates to discover opportunities for savings. Xeneta enables better procurement by giving you the tools to find which trade lanes and corridors perform below expectations.
Imagine that your organization has almost two thousands trade lanes necessary for your operations. Sorting through thousands of bids and contracts can be daunting and in many cases almost impossible.
To get a quick overview of potential opportunities, Xeneta uses the Spend Overview page to organize your uploaded data into digestable insights.
By default your spend is separated by corridors and sorted by the savings potential of that corridor. The savings potential is the theoretical value that your can save if your above-market prices were to match the market.
In this example, we can see that our highest savings potential is on the Asia to Oceania trade corridor with a potential savings of $225 873. We can continue our investigation by clicking on the corridor, which will break down this corridor’s freight data into individual port-to-port rates in the region.
Once the Asia to Oceania trade corridor is broken down into its separate trade lanes, we can clearly see that the largest potential savings — approximately half the savings for the entire corridor — are to be found on the Laem Chabang to Darwin trade lane.
By clicking on that trade lane, we can see additional information regarding volumes, our freight rates, and the market rates.
By looking at the market price and comparing it to the price currently being paid for the trade lane, we can see that we are overpaying by a tremendous amount. We now have a clear opportunity to improve our freight rates as we go into our next tender.
Xeneta keeps a historical record of market movements, which allows for retrospective reviews of your procurement strategy.
While each procurement retrospective will be unique to your organization, we can take a look at a case study to illustrate the benefits of using Xeneta. The following example showcases market movements between China East Main and North Europe Main between January 1, 2019 and November 2, 2020. The shipper in this case ships several thousand TEUs per year.
The light blue line represents the market average rage; the dark blue line represents the market low; and the brown line represents our contracted rates for this period.
In the first period, our contracted rate is below the market average and just above the market low. This is a great position to be in and Xeneta verifies that this is one of the best contracts you can get on the market.
The market sees a significant price drop in April 2019. With this change, our contracted rate is no longer a very good deal because it sits at more or less the market average.
Luckily, we are about to tender a new contract for the coming year. Ideally, we should be able to negotiate a price that reflects the low prices of the market.
What we get instead is a missed opportunity.
Our negotiations only lead to a price decrease of a few dollars from our previous contract. As an organization shipping several thousand TEUs, it should have been possible to achieve.
The market begins to fluctuate quite a bit in response to IMO 2020 and COVID-19. Initially, the stability of our long-term contract keeps our prices well below the market average. However, our year-long contract expires and the instability forces us to go with a more expensive 3-month-long contract to avoid getting locked in to an expensive long-term contract.
The developing COVID situation causes the market price to climb. We manage to secure another contract at a below-market price for the coming months.
Though the market for the most part cannot be predicted, in retrospect it becomes clear through our example that we can use Xeneta’s historical market visualization to aid us in setting tender targets.