In early 2021, Inchcape was appointed by Network Shipping (NWS), the ocean product arm of fruit producer Del Monte, as third-party liner agent to help build its commercial cargo program maximising utilisation of six spanking new reefer boxships. The collaboration has exceeded expectations, highlighting NWS’s customer-centric brand while ensuring cost-effective logistics.
New ships, new goals
Coral Gables, Florida-based Network Shipping started receiving its new fleet of six Chinese-built, fully cellular reefer containerships from late 2020 into the first quarter of 2021. All are of 1,300 teu with 634 plugs for reefer containers. “The new fleet was the result of years of investigation and mirrors the worldwide trend to containerise key reefer trades. But, to maximise utilisation of the ships we wanted to grow our regional commercial program for third-party cargoes. Aiming for 100% utilisation significantly improves the transport cost per box of fruit for our mother company and largest customer, Del Monte. Being identical sisters, the ships give us the flexibility to swap them around without damaging schedules,” says NWS Senior Vice President Shipping Operations Helmuth Lutty.
Network’s vision was to grow the business organically focused on its ‘boutique’ value proposition— providing the best solutions with a human touch. “As a hybrid shipping line/cargo owner we feel and understand the same market pain points as customers, which is why we call ourselves a boutique carrier. We didn’t want a ‘one size fits all’ model, but one where each and every customer is equally important no matter their size,” adds NWS Head of Commercial Francis Mc Cawley Foster.
Business model reset
NWS knew its existing business model wouldn’t work. “Our existing funnel and manpower was too narrow. We needed network coverage as soon as possible to leverage the capability of these new assets. We’re a lean organisation with agile decision making, but to materialise our growth ambition we realised we needed the support of an experienced partner,” says Mc Cawley.
Building a new in-house department would have meant hiring and training up to 30 new people to cover all markets. “It would’ve taken 12 months just to get started, been prohibitively expensive and we would’ve risked losing potential synergies,” says Lutty.
So, NWS embarked on the search for a third-party agency with a solid networking track record, international coverage and the necessary SEC, FMC, and country compliance expertise to build the program and help us reach our ambitious revenue goals.
Exhaustive due diligence
NWS has a strict vetting process for vendors, starting with disclosures to assess compliance. While the regulatory framework is set in stone, attitude and core culture are even more important. “A winning culture and approach that doesn’t cast the customer as the enemy were key criteria for us, as well as how the party could add value by establishing a system and hiring people as fast as possible. All this we discussed when we approached Inchcape, which is of course strong worldwide. Very few agencies were willing to do what we wanted, but Inchcape was aggressive and reflected our own ambition to grow the business. That was exactly what we were looking for,” says Lutty.
Trust was crucial
Mc Cawley says it was a tough process. “Sharing ownership of your brand, front and back, with an external agent means your commercial reputation is at stake. This is sensitive stuff, so trustworthiness was our top priority. Market reputation travels fast in the small world of shipping. Inchcape provided a super-professional proposal, and we immediately got on with their liner executives, which gave us confidence to take this leap of faith.”
Proof is in the pudding
The results speak for themselves. In 2019, revenue from NWS’s third-party program was USD 20m, and USD 13m in 2020.
“After we started working with Inchcape, 2021 was a record year both in revenue and moves. From the 1 May start date we finished on 36,000 teus in volume and exceeded our goal of USD 42m in revenue. We set up agencies in the US, Guatemala, Costa Rica, and in 2022 in Peru. ISS is also involved in our southbound Ecuador business. We achieved this together based on willingness, openness, and finding synergies,Francis Mc Cawley Foster – NWS Head of Commercial
“We successfully delivered what we had promised our Board of Directors, which in my book is impressive considering we started from scratch with new ships and a brand-new team. Our aim now is to grow revenue to USD 100m within five years,” says Lutty.
“With Inchcape’s help, NWS has strengthened its boutique identity at a time when third-party carrier services are in a shambles. “The fact that the big lines are well under the reliability average of 75% across shipping generally has been a big opportunity for us. Our pretty much 100% on-time arrival record is unique, as is servicing customers directly with frequent follow-up” says Lutty.
Building the brand
NWS aims to replicate the same service level it gives to Del Monte across the board. “Our bread and butter are small and medium-sized customers. We can’t tailor transit times, but what we do offer is transparency, reliability, and rapport. We are also investing in marketing and improving our service with more digital technology to support human interactions,” says Mc Cawley. In terms of cargo, northbound cargo is 95% perishable goods, southbound spans just about anything that can go in a container, as well as project cargo.
Customers are showing their appreciation, with NWS scoring top marks in service delivery evaluations. “For example, last year we moved 890 boxes for logistics company UCC, and almost 200 units already this year. We now rank as their number one service provider in North America, which is awesome feedback and great motivation. It proves that doing this from scratch was the best scenario allowing us to innovate and make corrections early on,” says Lutty.
He says both teams are now even more engaged and hungry to increase business. “We’ve made a big dent in the market and generated a lot of interest. We want to provide more than what customers pay for. Even fruit producers like Dole and Chiquita are now shipping product with us.”
Problems are bound to crop up in any business relationship, he says, but everything turns on how you approach them. “It’s all about establishing good communications, and information flow is second to none between ourselves and Inchcape. We have the same goal and that is to come up with the best solutions for customers,” he says.
NWS has also benefitted from Inchcape’s powerful analytical tools to support decision making and competitiveness. “Inchcape gave us confidence to discuss and move forward with new trades. They are honest in their feedback as to whether certain ideas are achievable, and vice versa,” says Lutty.
Mc Cawley says the most obvious triumph has been filling the vessels while maintaining NWS’s ‘essence’. “Growing 200% in a short space of time ups the chances of making mistakes as transactions multiply. That’s been my biggest concern—just like a restaurant that starts small with great food, but the food goes off as it gets more popular. We’ve managed to pull it off with the right team, the right solutions, and professional delivery, and that’s how we want to continue.”
The road ahead
Lutty says the big goal this year is to achieve revenue growth of 50% on 2021. “This will require a huge effort from the sales team, both northbound and especially developing southbound cargo. In 2022, we have already expanded successfully to Peru, and have moved 300 boxes in only eight weeks since the route began. We will also shortly go live with a brand-new, efficient, and easy-to-use web presence that facilitates bookings and trade-lane info.”
Mc Cawley says that now the ocean product is strong and stable, NWS wants to become more proactive as a logistics partner in cold-chain solutions, for example cold storage at ports and cross-docking. “Logistics becomes much more visible when things go wrong, as Covid clearly showed. Customers are crying out for a reliable partner, and we want to build extended products to provide better end-to-end solutions. A keystone for us is to do that as an asset owner,” he says.
As for further capacity expansion, Lutty says NWS may build more ships in the future but today’s vastly higher newbuilding prices rules that out for now. There is also zero capacity in the charter market. “In our business, where margins are very tight, it would be madness to commit to exorbitant rates of USD 50,000 to 75,000 per day for three years, which is what tonnage owners are asking for.”
Lutty concludes by saying the timing for the partnership with Inchcape was perfect. “Now we are exchanging data regarding potential interesting projects elsewhere, for example commercial cargo in the Far East and logistics in the Pacific Northwest. We continue to take advice as equal partners and learn from each other,” he says.
“We wanted an ambitious, straightforward partner who isn’t afraid of challenges but know the limits. Our relationship is strong as ever, and Inchcape is absolutely delivering on the promise they made in their proposal. It’s an exciting time for us,” says Mc Cawley.