Technology

Transportation Management | Compliance | Visibility | Procurement

AllMasters ’ ‘ digital consolidation ’ platform aims to bring more transparency to LCL shipment charges . Shutterstock . com

Tech vendor aims to help forwarders preserve margins in growing LCL market

By Eric Johnson

A technology vendor founded by two veterans of the less-than-containerload ( LCL ) industry is arming forwarders with the ability to preserve profit margin on LCL shipments moved by the large neutral non-vessel-operating common carriers ( NVOs ) that collectively control a large share of the LCL market .

The company , AllMasters , has developed a platform it describes as “ digital consolidation ” that ’ s designed to help forwarders avoid costly documentation fees charged by neutral NVOs that eat into the margin forwarders can extract from their shipper customers .

The platform also allows forwarders to benefit from lower pricing when a consolidated container is more fully laden . And it ’ s intended to help forwarders maintain relationships with LCL shippers as opposed to allowing co-loaders to go direct to shippers .

Neutral NVOs , often called co-loaders or consolidators , generally make their margins from LCL shipments by offering attractive rates at origin to a shipper or forwarder but then collecting payment from the consignee ’ s forwarder at destination , said Kathiresan Eswaramurthy , co-founder of AllMasters and a veteran of Toll Global Forwarding , DHL and Allcargo Logistics , the parent company of co-loader ECU Worldwide .

Those attractive rates at origin often include rebates to the shipper at origin . But at destination , the collection includes fees that are “ camouflaged as third-party passthrough costs ,” Eswaramurthy said , including the determination of container freight station ( CFS ) fees , which are dictated by the consolidator .

“ Thus , the market pricing ends up with very lopsided charges and overwhelming costs backloaded in destination markets ,” Eswaramurthy said . “ The collection at destination often exceeds the rebate at the origin . Since there is very little visibility of what is being collected at the destination , forwarders frequently are caught in a situation where the consignee complains of exorbitant charges being paid to the CFS or warehouse , and the forwarder often is forced to absorb the extra charges in order to keep the end buyer happy .”

Pricing clarity

The AllMasters product attempts to redress this by giving forwarders more insight into total costs across origin and destination charges .

“ The issue of high destination charges is real ,” said Sanjay Tejwani , CEO of consulting group 365 Logistics and a veteran of DHL , Maersk and DSV . “ Every consolidator — whether neutral NVOs or the large global forwarders — makes money off destination charges while offering very low ocean freight rates and attractive origin charges . This is the standard industry practice .”

Neutral NVOs charge documentation fees in the range of $ 50 to $ 200 , according to Philip Blumenthal , a forwarding veteran who most recently served as chief digital officer at ECU Worldwide . The fees make up approximately 10 % of the overall invoiced value to the shipper , compared with the gross profit for the forwarder , which would be 40 % to 50 %, he said .

Blumenthal added that while the challenge AllMasters describes exists , targeting the long tail of forwarders that have “ a low level of digitization ” and the lower price sensitivity of LCL customers versus full containerload customers might prove difficult in driving traction .

Setting a ceiling

AllMasters is also targeting the amount forwarders end up paying to neutral NVOs through a feature called Dynamic Cost Distribution . It lets forwarders book at a specific price that can go lower , but not higher , the more a container is filled , either by that forwarder or other forwarders co-loading in that box .

“ This allows the forwarder to benefit from the difference between their ‘ booked price ’ and ‘ final achieved price ,’” Eswaramurthy said . “ Today , the difference between the booked price and achieved cost remains with the consolidator .”

This lets forwarders either keep more of the margin as their booked price goes down or share the savings with their shipper customers .

The other area AllMasters is targeting is the bill of lading documentation charges that forwarders face . As Eswaramurthy described it , an LCL shipper typically moves goods on the forwarder ’ s bill of lading , a document that serves as the title of goods that transfers between the buyer and seller . Forwarders generally charge an administrative fee to generate and manage these documents .

email : eric . johnson @ spglobal . com

26 Journal of Commerce | September 23 , 2024 www . joc . com