Carrier Volume Incentive Programs: Why it’s Time to Modernize Your Freight Allocation Management Process

With never-before-seen supply chain congestion and skyrocketing demand, space on ocean carriers is at an all-time premium. For freight forwarders, this means that keeping up with your allocation commitments and tracking progress towards achieving incentives is also more crucial than ever. The good news? New technology makes the traditionally tedious process a lot faster, simpler, more accurate, and smarter.

Discover the new Freight Allocation and Incentive Management extension for Magaya Rate Management, helping shippers meet their ocean carrier allocation commitments with better data visibility and control.

What are freight allocations and incentives?

Allocation and incentive management is a cornerstone of the carrier’s load planning process. Owning an asset takes careful planning to ensure the financial viability of that asset while balancing the needs of those shippers with whom they partner and the ever-changing challenges the market presents. To ensure commitments are met by both parties, a carrier may offer a Volume Incentive Program (VIP) to reward the shipper for their support. These VIPs are carrier-specific and typically for high volume shippers.

Volume incentive programs in the context of ocean freight carriers are designed to encourage freight forwarders and shippers to commit to shipping larger volumes of cargo with a specific carrier. These programs offer financial or service-related incentives based on the volume of goods shipped over a certain period. Here are the key elements and benefits of volume incentive programs:

Key Elements of Volume Incentive Programs

Volume Thresholds:

Carriers set specific volume thresholds that must be met or exceeded to qualify for incentives. These thresholds are typically measured in TEUs (Twenty-Foot Equivalent Units) or FEUs (Forty-Foot Equivalent Units).

Incentive Types:

• Discounts and Rebates: Financial discounts on shipping rates or rebates at the end of a specified period based on the volume shipped.
• Priority Services: Enhanced services such as priority loading, faster transit times, or guaranteed space on vessels.
• Extended Free Time: Additional free time for container use, reducing demurrage and detention charges.
• Loyalty Rewards: Points or rewards that can be redeemed for future services or benefits.

Formal agreements outlining the terms and conditions of the volume incentive program, including the duration, volume commitments, and specific incentives offered.

Regular monitoring and reporting of shipping volumes is critical to ensure compliance with the program’s requirements. This often involves data sharing between the carrier and the shipper or freight forwarder.

Benefits of Volume Incentive Programs

• Cost Savings: Shippers and freight forwarders can achieve significant cost savings through discounted rates and rebates, improving their overall profitability.
• Operational Efficiency: Incentives for priority services and extended free time help streamline operations, reduce delays, and minimize additional costs.
• Enhanced Carrier Relationships: Committing to higher volumes fosters stronger relationships with carriers, leading to better negotiation power and more reliable service.
• Capacity Assurance: Guaranteed space on vessels ensures that shippers and freight forwarders can meet their shipping needs, especially during peak seasons when capacity is constrained.
• Competitive Advantage: Leveraging volume incentives can provide a competitive edge by reducing costs and improving service levels, which can be passed on to customers.

The Problem With Spreadsheets

Mastering your freight allocations and related incentives requires juggling and constantly monitoring a lot of data points from different places. While Excel certainly has its strengths, it also requires a lot of manual intervention, updating, and copy-pasting data from other sources. Not only is that a huge time-waster, but it leaves you vulnerable to error, plus it puts data in silos, leaving your key stakeholders out of the loop.

Data-Based Decisions With the Freight Allocation and Incentive Management Extension

Meeting carrier commitments and achieving Volume Incentive Program discounts takes careful planning. That’s why Magaya developed the Freight Allocation and Incentive Management extension for Magaya Rate Management, providing shippers with a more efficient way to meet their ocean carrier allocation commitments.

The Freight Allocation and Incentive Management extension for Magaya Rate Management gives shippers added visibility and control with a consolidated view of all allocation commitments in the Rate Management screen. With built-in dashboards and allocation data where users need it most, the extension provides better visibility and greater convenience to drive informed booking decisions based on allocation commitment performance.

Features include:

• Trade Definition: Per desired origin-destination roll-up strategy (port-port, country-country, etc.)
• Allocation Data Input: Upload your data via Excel at various time increments (yearly, monthly, weekly)
• Booking Data Consumption: Upload via Excel
• Rate Search Results: Provide visibility to commitment fulfillment progress
• Allocation Dashboard: Show commitment fulfillment progress with several filter options to view data in different ways (Carrier, Trade, Agreement, etc.)