Risk Optimization for NVOCC Through Outsourcing

Back Office Outsourcing for NVOCC

As the cornerstone of the global supply chain, the smooth flow of shipping is vital to world trade, national economies, commerce and industry, and the lives and well-being of millions of people. The global economic and trade pattern is undergoing rapid changes reflecting to the challenges faced in the past. But with a downcycle is the offing, it would be prudent for shipping industry to invest now in resiliency. Unprecedented growth in cross border e-commerce, pent-up demand post pandemic, etc. have made the deadlines tighter, itineraries more complex and set the expectations soaring from shipping customers. These challenges require the need to offer collaborative, value-added services and responsive, agile operations to win market share and increase profitability.

In such turbulent times, outsourcing can be seen as a viable business strategy. Turning non-core functions over to external suppliers enables companies to leverage their resources, spread risks and concentrate on issues critical to survival and future growth. A big chunk of operating costs is attributable to back-office works related to order processing, mailbox management, document management, track & trace, finance & accounting, sales and reporting. There are several NVOCC’s like Navio Shipping, Basileia Lines, Lancer Container Lines, etc. improved their operating ratios by outsourcing non-core works to the external BPO providers. Commonly outsourced works by NVOCC’s involve master data management, co-ordination for purchase, sale & lease for container, co-ordination for container insurance, inventory management with periodic audit & status report, Co-ordination for SOA, periodic reporting on SOA and P&L, trade costing and analysis, monitoring and reporting through proprietary software. In case of NVOCC agencies, scope of BPO providers broadens to inventory management, co-ordination and documentation for export & import, transhipment, terminal accounting, slot invoice accounting and principal SOA.

Gross profit margin for an NVOCC can be in the range of 10-25%, of which the operating expenses can be up to 50%. A BPO provider with deep domain and customer support expertise can service the same with overall reduction in expenses by up to 50%. A business case study suggested that when a shipping & logistics company outsources its documentation process to an offshore BPO provider, they can expect to save around $1 million per 50 FTE’s (full time employees) annually. The initial investment required for this transition, including knowledge transfer and training, is expected to be paid back within 09 to 12 months. Successful transport hinges on timely co-ordination, availability of correct documentation and prudent monitoring & reporting. BPO providers have emerged as the key entities to help the global shipping industry to adopt and adapt the modern landscape. Once adopted prudently the standardized processing environment created by the BPO providers can dramatically improve information dissemination and save the shipment from last minutes setbacks.