When it is advisable to use owned containers for shipments: a comparison between the SOC and COC units.
Have you ever thought about using owned containers for your shipments? Here’s what you need to know to consciously choose between a SOC container and a COC container.
The containers, invented by Malcolm McLean, have brought enormous value to the shipbuilding industry. When Malcom McLean invented the container-based intermodal system in the 1950s, they added enormous value to the shipping business. In their function, containers cross different interactions between the point of loading and the destination point, adding complexity and costs to the transfer of goods. Ideally, a person who has to send goods (let’s put your case!) wants the goods to be transferred to a specific destination at a certain time, keeping costs as low as possible. There are several options for each individual container transport need, but regardless of what the choice is, you have to make an initial decision whether to rely on SOC containers or COC containers.
COC – Carrier Owned Containers
Essentially a container is considered a “COC” when the carrier (the container handling party, typically the ship owner) owns the container and controls most of the entire transport chain. COCs are normally used for standard shipments on very busy routes. There is no advantage for using your own container if the carrier has ample container availability and you pay a fair price for end-to-end handling.
An example would be if you have to send goods from Hamburg to Singapore. It is a very common and used route, so usually the carriers have enough containers in Hamburg to provide the required service at the right cost. In addition, Singapore is not a remote location that could be difficult for the carrier to reuse the container after emptying it.
The benefits of a COC container
Using a COC container is simple: you pay the carrier a certain “all-inclusive” rate to move your goods from a location A to a location B and the carrier is responsible for the entire route. This includes the supply of the container itself. An important advantage is that once the transport has been completed, the recipient no longer has to worry about the container. After emptying, the container is returned to the carrier’s depot and there are no further obligations to move or use. In those cases where the shipment comes from an area where commercial imbalances have caused an excess of empty containers, the use of a COC container can even result in significant discounts on transport rates. This is because this essentially helps the carrier to reuse an excess container for that area by using it for an export load.
If the use of COC containers is so simple, why is it not used for all shipments?
The problems arise when the shipment we have to make is one of those that for some reason are out of the most important standard routes of a carrier. This often leads to situations where the carrier prefers the loader to use its own container.
In our example, this could happen if we simply change the destination port from Singapore to Karachi, which is a location with overstock of significant container and less sophisticated local logistics management processes. The simple and inexpensive COC container in Hamburg thus acquires complexity, which means that the costs increase exponentially.
If the carrier has limited inventory of containers in the port of departure or there is no need for additional units at the point where it will be returned empty (for example because in that specific location there are more and more imports that exports or because it is trivially in a distant position inland), of course, will require a higher tariff to cover the costs. In addition to the shipping cost surcharges, determined by the more or less high demand for containers in the destination port, it does not take much to transform a use of a COC container, theoretically easy and efficient, into a sender’s nightmare. Key words then come into play as demurrage and stop. Basically, you have to pay a penalty if you exceed the agreed time for the use of the carrier’s container. While this helps to ensure a quick reuse of containers (optimal situation for the carrier!) – for you can easily erode the theoretical savings obtained through the use of a COC container.
The demurrage costs can quickly add up to 15-20 USD per day and normally remain outside your control. This frequently occurs in locations that are known to have high process uncertainty, such as slow customs procedures or unreliable port workers.
In our example, you could imagine that the container remains locked in customs for 30 days, thus accumulating large costs of demurrage that totally change the economic efficiency of the entire shipment operation of the goods.
But if the COC containers are too expensive or are not even available, what should I do?
The alternative is called SOC – Shipper Owned Container
A container is considered a “SOC” when the same owner of the goods or, in its stead, the forwarder arranges its own container and then takes a carrier and usually several other subjects to transport it, buying from the carrier only the ship’s slot for the maritime transport.
A frequent example for SOC shipments is loads for construction projects in remote locations inland (think of a construction site in the jungle) where it may take 30-40 days to bring the container back to the port.
The key factors of SOC containers are full control and flexibility, which often translate into several advantages:
• Procurement control: it is possible to find the containers autonomously, which is essential for the places where the carriers are not able or even unwilling to provide containers or offer them only at very high rates;
• Property control: you can choose precisely which containers are needed, under what conditions and for what period of time, including whether to buy or simply rent (yes, rent!) containers according to the needs of the moment;
• Cost control: you avoid extra unforeseen transport and parking costs as you do not have to move or return containers to the carrier within a certain period of time.
So why not use SOC containers for each shipment?
There is always a great responsibility behind great power. A SOC container allows control, flexibility and independence, but this means that you need to spend your time finding the right partner for each stage of transportation.
The more effort is required to organize SOC containers, the lower the cost / time advantage will be. When it comes to a standard transport where the advantage of a SOC container on a COC container is marginal, it may not make sense to go through this process.
Moreover, when organizing a SOC container, you must also consider what to do with the container once you reach the destination if you do not need it for different purposes (for example, which static warehouse at destination). This problem can be solved through One Way rental formulas (for information: CONTACT US).
While a large part of exports can be best managed using COC containers, there is an ever-increasing number of operators turning to SOC containers as an attractive alternative to save costs and gain greater control over their logistics processes.
Star Service is a company that has been operating in the SOC container sector for decades. We are ready to put all our experience in the field at your disposal, so if you think that a SOC container could be the solution to many of your logistical problems, do not hesitate to contact us, we will be delighted to advise you.