BCO (Beneficial Cargo Owners)

Beneficial Cargo Owners (BCO)

International trade and shipping entails various stakeholders such as cargo owners, origin, carriers, shipping routes, destinations, and customers. Understanding the role of each of these stakeholders plays a significant role in streamlining and managing shipping operations. In this article, we will explore the beneficial cargo owners (BCOs) and their role in the shipping process.

Who are Beneficial Cargo Owners?

Beneficial Cargo Owners (BCOs) are the actual owners of the goods being transported via ocean freight. Unlike intermediaries such as freight forwarders or Non-Vessel Operating Common Carriers (NVOCCs), BCOs have a direct financial interest in the cargo. BCOs can include manufacturers, retailers, and wholesalers who import or export goods for their own account.

Take for example; an importer of smart television from Hong Kong is the Beneficial Cargo Owner (BCO) for that shipment. This means they're responsible for the entire ocean freight journey, from choosing how to book the transport (direct carrier or freight forwarder) to ensuring proper export/import documents and taking financial ownership for the cargo, including any risks or delays. The BCO is essentially the one driving the shipment and assuming full responsibility for its success.

BCos Channels of Classifying Freight

BCOs have two primary channels for booking ocean freight: they are the direct and indirect channels

Direct Channel (Large Shippers): This method is used by large companies that ship high volumes of goods across international routes. They leverage their significant cargo volumes to negotiate directly with shipping carriers. Direct channels require close communication with carriers to secure the best rates and service guarantees.
Indirect Channel (Small & Medium Shippers): Smaller and medium-sized BCOs typically leverage this method. While they may not have the bargaining power for the lowest rates, indirect channels offer cost savings by eliminating the need for an internal logistics team. Freight forwarders handle the communication, negotiation, and logistics on behalf of the BCO.

What Role Do The BCOs Play in Shipping Operations

As the owners of the cargo, the BCOs play a significant and crucial role in the logistics and shipping industry for several reasons:

Direct Control: BCOs have direct control over the logistics and transportation of their goods, allowing them to make decisions that align with their business interests.
Cost Management: By directly managing their shipping needs, BCOs can negotiate better rates and optimize logistics costs.
Supply Chain Efficiency: BCOs can streamline their supply chain operations, improving efficiency and reducing delays by having a direct relationship with shipping companies and service providers.

Operational Impact of The Beneficial Cargo Owners (BCOs)

In logistics, the role of BCOs is far reaching, seeing as they are primary stakeholders in the entire process. They impact:

Contract Negotiation: BCOs often negotiate contracts directly with carriers, leading to more favorable terms and conditions.
Logistics Planning: BCOs plan and manage the logistics of their shipments, coordinating with various service providers to ensure timely delivery.
Risk Management: By directly overseeing their cargo, BCOs can implement effective risk management strategies to protect their goods during transit.

Freight Forwarder: An intermediary that arranges transportation on behalf of shippers but does not own the cargo.
NVOCC (Non-Vessel Operating Common Carrier): A company that arranges ocean transport of goods without operating its own vessels and often acts as a middleman between the BCO and the carrier.

Beneficial Cargo Owner (BCO) Strategies for Managing The Entire Shipping Process

Because they have the most to lose, the onus is on the BCOs to effectively manage operations for desired outcomes. To do these, the following strategies will be necessary:

Leverage Technology: Use advanced logistics and supply chain management software to gain real-time visibility and control over shipments.
Negotiate Contracts: Success in shipping operations will depend on what the BCO contract specifies. Directly negotiate with carriers and service providers to secure the best rates and terms. You can leverage economies of scale when the cargo volume is larger.
Implement Best Practices: Adopt industry best practices for supply chain management, including regular audits and performance reviews.

Practical Tips BCOs Can Leverage To Manage Other Stakeholders

Build Strong Relationships: Develop and maintain strong relationships with carriers and logistics service providers to enhance collaboration and service quality.
Monitor Performance: Continuously monitor your partners' logistics services and their performance to ensure they meet the required standards and KPIs.
Optimize Routes and Modes: Evaluate and optimize shipping routes and modes to reduce costs and improve transit times.

Nike’s Experience As a BCO in The Freight Market

Nike, the global sportswear giant, serves as a prime example of a BCO leveraging its position to optimize shipping operations and costs. In 2023, Nike shifted towards a direct booking strategy, bypassing freight forwarders and negotiating contracts directly with ocean carriers.

This move was driven by the company's significant cargo volumes and its desire for greater control and visibility over its supply chain. By engaging directly with carriers, Nike was able to secure preferential rates and guaranteed space on vessels, especially during peak seasons.

The company also gained access to real-time tracking data and enhanced communication with carriers, enabling faster response times to potential disruptions. According to Nike's 2023 annual report, this direct booking strategy resulted in a 15% reduction in ocean freight costs and a 20% improvement in on-time delivery rates compared to the previous year.

By leveraging their bargaining power and utilizing technology for increased visibility and control, BCOs like Nike can achieve significant cost savings and operational efficiencies.

Terminal49 Solutions

Terminal49 offers comprehensive solutions tailored for BCOs, providing real-time visibility and control over their shipments. Our platform helps BCOs track their cargo, manage logistics operations efficiently, and optimize their supply chain. With Terminal49, BCOs can improve decision-making, reduce costs, and enhance overall supply chain performance.

For more information or to schedule a demo, visit Terminal49.