‘Better together’ might sound like a saccharine poster slogan, but it’s often true. Even in the world of freight!
The term freight alliance refers to cooperation between multiple shipping companies for mutual benefit. More and more, our industry is witnessing this power of collaboration; there is strength in numbers. Shipping companies can reap the benefits by pooling resources, and passing on better, cheaper and more efficient service to their customers.
Let’s look at what a freight alliance is and its advantages.
What Is A Freight Alliance?
When shipping companies join forces to optimise their operations and improve their offerings, it’s called a freight alliance.
We’ll come on to the benefits shortly, but first, a real-world example – The 2M Alliance.
The 2M Alliance is a partnership between Maersk Line and Mediterranean Shipping Company, or MSC. These two global shipping giants share vessels on routes, enabling them to provide their clients with frequent sailings and a wider reach. Their partnership means that they can pool resources, reduce costs and run more efficiently. These benefits filter through to the customer in the guise of competitive freight rates and reliable service.
How Do Freight Alliances Work?
There are two ways that shipping alliances operate.
The first is through a vessel-sharing agreement (VSA). VSAs are a type of partnership between shipping companies in which it is agreed that members of the alliance will share space on each other’s vessels or vehicles. This optimises capacity and reduces operational costs. VSAs also enable companies to offer more frequent routes and achieve a wider reach.
The second way companies partner in a freight alliance is through slot-sharing agreements. Unlike VSAs, which see companies operating their vessels collaboratively on agreed routes, slot-sharing agreements involve sharing only a predetermined space on another company’s vessel and not joining forces with the entire vessel’s operation.
1. Global Networks, Local Expertise
When shipping companies form freight alliances, they create a rich, global network of partners sited all over the world. Global connections like these allow shippers to access new markets with ease and reach new destinations they may not have had access to with reduced risk.
Oh, the opportunities!
These networks of alliance partners provide a platform for knowledge exchange. Different partners bring specific knowledge of their local markets and regulations, helping shipping companies navigate complex regulations and ensuring a smooth and simple shipping experience even in unfamiliar territories.
And the sharing doesn’t stop at know-how, either. Freight alliances provide shipping companies with access to a much larger pool of resources. Suddenly, there are more vehicles, ships, warehouses and even staff available, meaning shippers can exercise agility and flexibility in response to changes in demand.
2. Cost Efficiency: Sharing The Load, Lowering The Costs
Freight alliances enable cooperating members to spread costs and resources, which means overall spending is reduced.
This works in the same way as buying in bulk. The more capacity you ship, the lower the cost per item it is to ship them. Joining a freight alliance makes it possible to access these bulk discounts, even if your shipment is actually pretty small.
Working with other shipping companies and pooling knowledge and expertise allows for more efficient route planning, too. This collaboration reduces both transit times and fuel consumption, saving pennies and passing on the savings in the form of lower shipping costs for clients.
And last but not least… Sharing the cost of new or advanced technology and infrastructure. If you’re part of a freight alliance, your group of partners can join forces when spending out on big investments like transformative tech so that you all reap the benefits but only pay a fraction of the price to do so.
3. Enhanced Services: Going the Extra Mile
There are so many ways that freight alliances expand and improve upon the services a shipping company might offer…
Reach
Through alliances, shipping companies achieve broader geographical coverage. They have access to regions that might have been too difficult to serve alone, as well as improved routing options, which means they have much more to offer potential and current clients.
User Experience
Coming together and pooling resources means that freight alliances can afford to create dedicated customer service and support teams. With more people on hand to help, this results in improved client experience and faster comms to achieve answers to issues and resolutions for successful shipments.
What’s more, is that an alliance of shipping companies can offer more frequent schedule slots and a more comprehensive service range to their clients.
Range
Shipping companies in freight alliances benefit from being able to offer a wider range of shipping services than they could solo.
Collaboration with other shipping companies sets businesses up with access to a broader range of provisions. This means, for example, that you can start to offer warehousing, specialised handling and customs brokerage when you didn’t have the knowledge, expertise or staff available to offer it before.
Competitive Advantage
When shipping companies work together and pool their strengths, it means the market is more competitive. Smaller companies can compete with larger businesses because their offering is more comprehensive.
In turn, alliances also help to stabilise the market. Groups of shipping companies that leverage their collective knowledge and resources prevent capacity surplus where needed, improve capacity availability where it is in short supply and maintain more predictable freight rates.
Partnerships Are Powerful
Freight alliances create a win-win scenario for all involved, fostering efficiency, expanding reach, enhancing client experience and offering a competitive edge in the global market.
Are you looking for help with upcoming shipments? Not sure where to start with importing or exporting goods? Talk to us. Millennium is a friendly freight expert and we’ll be happy to help.