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Every week, FreightWaves explores the archives of American Shipper’s nearly 70-year-old collection of shipping and maritime publications to showcase interesting freight stories of long ago.
This article comes from the November 1975 issue of American Shipper and explains a unique way that workers at the time understood pricing for ocean rates.
The Ocean Rate Game: Everything you wanted to know about ocean rates
In recent years, it has become fashionable for ship, rail, and barge lines to substitute the name “pricing” for their old tariff and rate sections. The word is down to earth and specific, like the price on a box of Wheaties at the corner grocery. As everyone knows, the “price” tells how much you have to pay.
Little is said about the method by which the price is derived, except for occasional talk about “professionalism” and “experts.” In fact, it takes a rather professional expert to find his way through the maze of tariffs, exceptions, rules and changes which pour out of the pricing departments.
Taking note of the trend toward simplification, the traffic office at Anglo-American Clays Corporation in Atlanta devised a unique system that removes all the mystery of pricing. They call it: “The Ocean Rate Game.” It’s a genuine game, complete with four wheels and spinning pointers. Any child can play the game and become an expert within minutes. But the game is not limited to children. It’s an adult sport.
The Ocean Rate Game is used most frequently in good times when business is brisk, cargoes plentiful and owners advise their pricing departments to determine just what the market will bear. Richard E. Lapin, who worked for a well-known steamship line before going to Anglo-American Clays as a distribution coordinator, was one of the 3-man “brain trust” which developed the Ocean Rate Game a year ago.
“We can still remember difficulties we encountered during most of 1974 — difficulties in getting space, continuing increases in ocean freight rates, equipment shortages, etc,” he said. “In fact, rate increases reached a point that we, as shippers, felt that the carriers’ rate policy had become ‘charge what the market will bear.’ As a result, we developed our rate game — complete with rules and game board.”
The game was developed by Lapin, Export Manager Anthony S. P. Varcoe and District Manager Robert M. Cilbertti. While their game board is crude by Parker & Company standards, it was demonstrated at the Atlanta Traffic Club meeting last April. Lapin said a few club members (most likely the pricing experts) took a dim view of the game, but most members enjoyed it immensely.
In the Summer of ’75, with cargoes down, Lapin says, “For the time being, we will file our rate game away. The pendulum has now swung away from frequent rate increases. However, when good times return, we’ll dust it off.”
The Game
Slips of paper with numbers on them will be placed into a hat. Conference men will pull slips from the hat. The “Area” dial will determine the order as the number on the slip is pulled. For example, Conference Chairmen pulling a slip with number 1 on it goes first.
Steamship conferences must have the spinner land on its geographic trade to continue the game. Chairmen spinning and landing outside their geographic area must hold rates at the same level for 90 days. Conferences with the Area spinner landing on their geographic area can move to the amount spinner.
Spin the Amount dial to obtain the rate increase. The increase numbers are shown as percentages to be added to the rates. If the dial lands on “add digits to number at the office,” any increase digit total may be used. If any conference unilaterally decides not to increase after having obtained the right, it forfeits the match. If the spinner lands on the line between two increase percentages, the conference must use the average of the adjacent amounts. For example, if the spinner lands between 5% and 6%, a 4.5% increase will be implemented. Next, move on to the Reason dial.
Spin the Reason dial to obtain the rationale for increasing rates in your trade. Beware of the penalty provision that is invoked if a conference handles the public interest aspect of a rate increase improperly.
Spin the Effective Date dial. Each number represents the number of days a conference will have to wait to implement the rate increase. If the dial lands on 30 days, the conference must wait 30 days before playing the rate game again.
Summary
To determine the winner, divide 360 by the number of days until the effective date of the rate increase, then multiply the resulting quotient by the percentage increase. The conference with the highest weighted score wins. For example, a 5% increase with 30 days until the effective date would result in a weighted score of 0.6. The game’s results will be published in the “Ocean Rate Changes” column of the Journal of Commerce.
Conferences will be unable to play the game while waiting for the implementation of the increase or as described in rule 2 above.
Non-conference shipping lines will react to normal market conditions and obviously will not want to play this game.
Conference chairmen who do not obtain rate increases for their conference during a calendar year will be deemed “paper tigers.” Their names and records will be transmitted to the office of the President of the United States as personnel to be recommended for any future vacancies in the Federal Maritime Commission.
Conference chairmen who post one or more increases in rates for their conference during a calendar year will be deemed “go get ’em tigers.” Their names and records will be transmitted to the chairmen of the boards of steamship companies for any future vacancies in steamship line management positions.
Any resemblance between this game and actual rate making is purely coincidental, as the current mechanism for rate making lacks the organization inherent in this game.
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