Should NVOCCs Be Afraid of NYSHEX?
From time to time NYSHEX is labeled a “disruptor.” It happened in industry news just this week. A Non-Vessel Operating Commercial Carrier in Oceania lumped us in with a TMS provider and a rate comparison tool which connects cargo owners with NVOCCs, claiming we’re all intent upon “disrupting [NVOCCs’] business.”
It’s not my intention to pick on someone who may not understand the NYSHEX business model. However, since NYSHEX is all about collaborating with industry stakeholders for the good of shipping, it is worthwhile to unpack the two questions this statement begs.
1) Is NYSHEX, in fact, a disruptor?
2) Are we disrupting the business of NVOCCs/freight forwarders?
What is an industry disruptor?
“Disruptive innovation” is a term coined by Harvard professor Clayton Christensen, referring to a process in which an underrated product or service starts to become popular enough to replace a conventional one. The product takes root in the bottom of a market – and in many cases, develops a bad reputation because of it. However, due to low costs, higher accessibility, or other advantages, the product eventually becomes more appealing than its contemporaries within the industry. (Source)
Christensen emphasizes in his Harvard Business Review study that the characteristics of a disruptor are: 1) it replaces a conventional product, 2) it targets the disenfranchised customers at the bottom of a market, and 3) its quality is, at least initially, lower than that of incumbents.
1) Does NYSHEX replace a conventional product? No, without the willingness of a carrier and a shipper (whether BCO or NVO) to enter into a contract of carriage of goods, there would be no need for NYSHEX. NYSHEX is the innovation that takes the ocean contracts that shippers and carriers are going to sign anyway, secures them with two-way commitments, and neutrally gets things back on track when exceptions arise. We don’t replace carrier-shipper relationships or contracts. We make them stronger. Here’s one example of just that.
2) Does NYSHEX target customers at the bottom of a market? While NYSHEX offers value to shippers of any size or freight budget, a snippet from our member list proves that some of the largest shippers who have excellent carrier relationships are using NYSHEX. The true commonality between NYSHEX members is that they place so much emphasis on quality service that they are willing to deviate from the way things have always been done to be part of the solution to broken contracts.
3) Is the quality of the NYSHEX solution subpar? Across over 115,000 containers, NYSHEX has maintained a reliability score above 99% versus the industry average of 76%. Additionally, over the last three years, NYSHEX has saved the industry nearly 12Musd in reduced no-shows, rollings, and cancellations.
If 700+ BCO/NVOs (and six global ocean carriers) choose to appoint NYSHEX to secure their contracts because it reduces unbudgeted freight spend, enables greater control over their supply chains, and enhances partner relationships, is that actually disruptive? Let’s move on to the next question.
Is NYSHEX disrupting the business of NVOCCs?
First off, can NYSHEX replace an NVOCC? No, NYSHEX is never party to the contract/bill of lading. Furthermore, the documents which govern NYSHEX forbid us to ever become an ocean transport intermediary.
Does NYSHEX target the business of NVOCCs? No, over half our members are NVOCCs, and NYSHEX has intentionally abstained from enhancing the product to include any value-added services commonly performed by the hundreds of NVOCCs who support us. We regularly see BCOs asking their NVO partners to contract through NYSHEX on their behalf, perform the value-added services they contracted them for, and charge them accordingly.
So what’s the big deal? The fear that a handful of traditional NVOCCs in the industry have is that their customer could log onto NYSHEX, obtain a rate to move containers, and either switch the business, or whittle away some of the markup that’s built into the ocean freight. The reality, however, is that same customer could visit any carrier’s website today and obtain an instant quote to do that. NYSHEX carrier partners determine the pricing they wish to offer their customers based on two-way, enforceable commitments. We just make sure both sides get what they contracted for.
Innovation or disruptor?
In summary, there is a difference between innovation and disruption. We take pride in transforming the vicious cycle of unenforceable ocean contracts into a virtuous one. Many of our savvy NVO members have successfully sold guaranteed ocean services powered by NYSHEX to their customers as a differentiated, premium product. Hear it straight from some of them:
Let’s set up some time to discuss harnessing the power of guarantees to better serve your customers and protect your freight spend. When we work together, the only thing that gets disrupted is volatility!