Allocation is the space an importer or freight forwarder reserves on a carrier. That space is allocated (hence the term “allocation”) to the client. It sort of guarantees space on a vessel and the terms are documented in contract Service Level Agreements (SLAs) with the shipping lines. Supply chains operate on bespoke planning and execution, so importers strive to reserve space at the best possible price, with the guarantees to have enough space reserved. Contracts are typically negotiated for 12 months.
Based on historical trends and new business plans, a supply chain manager knows how much product will need to be shipped during the year.
Supply chain managers analyze how much product needs to be shipped between which combination of ports, and which carriers operate on those routes.
Then they negotiate with carriers how to reserve the required space on those routes at the best possible price for the year.
That space is called allocation, and freight contracts record the costs and other terms. When product is shipped, allocation is used.
Companies pay penalties if they do not use their allocated space.
Using too little results in penalty fees.
That is why Supply Chain managers each week closely track how much was used and how much remains on each shipping lane with each carrier.
Over a year you use the reserved space on each carrier
Accessing carrier websites
Moving information manually into spreadsheets
Frequent email communication with carriers using these spreadsheets
Trying to keep data between unconnected sources accurate
Trying to manually track used-up allocation
It aligns to the needs of mid to large companies with team members dedicated to specific transport modes. Single-mode solutions can be plugged into multi-mode platforms but as we all know, trying to manage one set of KPI’s through multiple systems is a bumpy process.
Cargoo’s allocation management seamlessly integrates ocean freight supply chain processes for ocean freight:
Involves tendering and securing carrier allocations at optimal rates, followed by auditing carrier invoices to ensure they align with contract terms.
Focuses on ordering from suppliers and planning the most cost-effective delivery of those orders to the importer.
Handles the execution of Shipping Instructions with the help of supply chain partners (suppliers, carriers, customs, port authorities) while consolidating documentation into one tool for easy sharing.
Provides Supply Chain managers the dashboards and reports with key metrics such as Container Capacity Utilization (CCU), ETA Tracking, Detention and Demurrage (DnD), and Allocation Consumption. Cargoo supports Supply Chain leaders to enhance reports answer difficult “why” questions, and optimize processes.
The process starts with knowing how much you want to ship. This is “volume planning”. Because things change during the year, volume plans are rarely accurate. But combining data sources can help and Cargoo enables clients to:
This forecast drives negotiations with carriers where purchasing managers try to negotiate the best possible prices to ship their product where it’s needed.
This is called “securing allocation” because you now have space in a boat allocated to you each month / week.
At this point it is time to start using allocated space by allotting shipments to the carriers that can deliver your products where needed most cheaply. This is known as “consuming allocation”
BCOs may find opportunities to reduce fees because
The benefit of an end-to-end platform is that all this data if fed into the reporting modules which updates allocation consumption by carrier and audits the costs to compare them against contract terms.This helps you be a good customer and avoid penalty fees from carriers
And validate if carriers are being good partners.
Securing annual space requirements enables companies to negotiate better shipping rates. By tracking remaining allocation on each shipping lane, businesses can avoid extra costs, such as penalties or expensive last-minute spot bookings. Fulfilling the agreed terms is key to a successful partnership with the shipping lines.
Clear oversight of contracts, rates, and allocation allows supply chain managers to better coordinate with partners, minimizing errors and reducing delays.
Knowing the exact remaining allocation across all lanes allows for faster decision-making when disruptions occur.
Ensure accurate invoicing by matching carrier invoices with contract terms, helping to prevent overbilling.
A single platform for seamless collaboration with all supply chain partners, including Electronic Data Interchange (EDI) connectivity with ocean carriers. This ensures real-time, accurate data from a single source of truth.
Customizable reports by location, carrier, or timeframe, offering detailed insights into completed or at-risk bookings. Advanced platforms include reporting “owned” carrier contracts or contracts negotiated by freight brokers.
A single platform for seamless collaboration with all supply chain partners, including Electronic Data Interchange (EDI) connectivity with ocean carriers. This ensures real-time, accurate data from a single source of truth.
Customizable reports by location, carrier, or timeframe, offering detailed insights into completed or at-risk bookings. Advanced platforms include reporting “owned” carrier contracts or contracts negotiated by freight brokers.
Cargoo clients have noted significant improvements in their supply chain operations. Below are examples of client feedback, expressed through both measurable results and qualitative statements.
reduction in the time required for Shipping Instruction submissions (see more)
fewer emails when updating clients (see more)
Within one year of using Cargoo, a large BCO improved its booking compliance with carrier contract conditions from less than 30% to over 70%.
In conclusion, an effective allocation management tool for ocean freight should offer pre-configured features that minimize setup time, detailed customizations to fit specific business needs, and collaborative capabilities for real-time data sharing across the supply chain. Additionally, flexible reporting and the ability to delegate tasks while maintaining control are essential for optimizing operations and reducing costs.
