Transportation News

Ocean Cargo Carriers Must Optimize Networks

Carriers will have some hard decisions for the remainder of 2017, they must continue to drive down costs through effective post-merger integration and fleet rationalization to bring supply and demand into balance, and continuously optimize networks to make them more efficient.

Owing to the structural overcapacity in the container industry, shippers have essentially had most of the pricing power since the financial crisis, says industry consultant Lars Jensen, CEO and partner of SeaIntelligence Consulting in Denmark.

As a consequence, this has enabled shippers to benefit financially from the cost saving measures brought about by slow steaming, mega-vessels, vessel sharing and “skipped sailings.”

In his new book titled “Liner Shipping 2025,” Jensen observes that vessels ordered in 2014 and 2015 will continue to be delivered over the next two years, meaning high levels of scrapping are likely to continue.

However, Jensen also notes that in 2019 and beyond, a disproportionate share of feeder-sized vessels will be reaching the end of their lifespan, and orders for their replacements are likely to surge.

“The good news is that their relatively small size means the impact on the overall global market will be limited,” adds Jensen.

In the meantime, carriers will still have to make some hard decisions for the remainder of 2017, says Esben Christensen, managing director of the international consultancy AlixPartners.

“They’ve already taken steps to relieve their financial woes, including slashing expenditures,” he says.

“They must continue to drive down costs through effective post-merger integration and fleet rationalization to bring supply and demand into balance.”

Fortunately, spot rates have improved in the wake of last year’s Hanjin bankruptcy, and carriers seem to realize that they must do everything they can to maintain that trend, adds Christensen.

“The carrier community’s ability to drive rate levels higher into future contract negotiations will likely decide whether 2017 will be the turning point the industry desperately needs - or just another bad year in a growing string of losses.”

Ritzau Finans, an analyst with the Paris-based consultancy Alphaliner, maintains that the reduction in idling container ships has been driven by the rollout of new alliance networks, adding that with reduced availability of spot tonnage, the charter market is kept upbeat.

“The container shipping industry is expected to continuously optimize networks and make them more efficient,” he adds.

Analysts for the Baltic and International Maritime Council (BIMCO) in Copenhagen, agree, noting in their “Shipping Market Outlook” that cutting costs where it’s still possible and making the most of the fleet available remains essential to reaping the benefit of the individual alliance members.

Above all, add BIMCO analysts, the implementation of new alliances remains the one thing to watch carefully in 2017. The three ocean shipping alliances - which replaced the previous four - now control 77% of global container ship capacity and as much as 96% of all east-west trades.

“Before getting carried away, we should remember that 57% of all demand, as measured by twenty-foot equivalent unit [TEU] miles, is generated by non-east-west trades that are particularly impacted by the recent years’ cascading of tonnage,” says BIMCO President Anastasios Papagiannopoulos. “Another two-tier market is in the making.”

BIMCO expects the container ship fleet to grow by 2.9% in 2017, under the assumptions that 450,000 TEU will be demolished and 1 million TEU will be delivered. For that to happen, the current demolition interest must cool somewhat and the delivery pace must pick up, analysts conclude.

Russ Romine, Vice President of International Transportation at LEGACY Supply Chain Services in his article “Keeping Ocean Freight Moving This Peak Season,” states that ocean transportation is becoming more of a transaction-driven business, but it should never be done transactionally.

Romine further states that by sacrificing service for the lowest price, a shipper runs the risk of reducing visibility and predictability in their supply chain, increases supply chain risk, limits the ability to come up with proactive solutions to problems that occur during transit, and decreases the efficiency and productivity of their internal operations and customer service teams and, it actually increases their true logistics costs.

“Filling this service gap is something importers and shippers must face the reality of as carriers and low-price forwarders continue to absolve themselves of responsibility for service-based activities”

Read the Article: Keeping Ocean Freight Moving This Peak Season

Article Image: Speed Trans Logistics

Related White Paper & Infographic Resources

Download the Paper

International Transportation: Price Matters, But At What Cost?
This paper is a comprehensive guide to international transportation, that will help logistics managers better evaluate and plan their; supply chain strategy, logistics infrastructure, and risk mitigation strategy. Download Now!


Download the Guide

Infographic: 2017 Peak Season Ocean Freight Market
Although no one can predict what this year’s peak season will look like, we can use current pricing and capacity indicators, as well as the past to make educated projections. Download Now!



Article Topics
Best Practices   Transportation   Ocean   Ocean   Ocean Freight   All topics


Comments
Be the first to post a comment.
You must be logged in to post a comment. Login.

About the Author
Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]
 
Latest Transportation News
Transportation Predictions That Will Shake-Up the Supply Chain Industry In 2018
Dan Clark, Founder and President of Kuebix, gives his annual vision of what he sees happening in the transportation and supply chain industry including; tax reforms, decreased capacity, higher rates, and…

Home Depot Considers Buying $9 Billion XPO Logistics So Amazon Doesn’t
If Home Depot were to make an offer, one main impetus would be to keep XPO out of the hands of Amazon, which the home improvement retailer believes has also considered buying the logistics company, according…

CSX Provides Surface Transportation Board with Update on Precision Scheduled Railroading Progress
In a letter to leadership at the United States Surface Transportation Board, CSX CEO James Foote outlined the progress the Jacksonville, Fla.-based Class I freight railroad carrier has made in its ongoing…

The Five Ways 3PLs Can Retain Their Employees
Creating a positive work environment can help your 3PL improve its operational performance.


 

24|7 Pro Team

The 24|7 Team is your direct pipeline to solutions for your business challenges. It's your opportunity to have supply chain and logistics experts look at your specific challenges and needs, and give you free, no-obligation advice, solutions, and information.

The 24|7 Team will simplify the task of creating a database of likely partners, building your knowledge base, and preparing your Request for Proposal list.

1
  Choose a topic for your RFP

Transportation RFP/RFI

The Transportation RFP is your direct pipeline to solutions for your transportation challenges. It's your opportunity to have logistics experts look at your specific transportation challenges and needs, and give you free, no-obligation advice, solutions, and information specific to your request.

Choosing the perfect software or system can be an indomitable challenge. Using this transportation/TMS RFP will simplify the task of creating a database of likely partners, building your knowledge base, and preparing your Request for Proposal list.

Warehouse/DC Management RFP/RFI

The Warehouse Management Systems (WMS) RFP is your direct pipeline to solutions for your WMS challenges. It's your opportunity to have logistics experts look at your specific WMS challenges and needs, and give you free, no-obligation advice, solutions, and information specific to your request.

Choosing the perfect WMS solution can be an indomitable challenge. Using this WMS RFP will simplify the task of creating a database of likely partners, building your knowledge base, and preparing your WMS Request for Proposal list.

Supply Chain RFP/RFI

The Supply Chain RFP is your opportunity to have logistics experts look at your specific challenges and needs, and receive free, no-obligation advice, solutions, and information. It simplifies finding a pool of likely partners, building your knowledge base, and preparing your Request for Proposal list. The companies in the Logistics Planner have agreed to respond to your request for in-depth information and follow-up, and your request is totally confidential.

Software/Technology RFP/RFI

The Software/Technology is your direct pipeline to solutions for your logistics information technology challenges. It's your opportunity to have logistics experts look at your specific technology challenges and needs, and give you free, no-obligation advice, solutions, and information specific to your request. Whether it's WMS, TMS, Mobile or Cloud, our pros can help.

The companies listed below have agreed to respond to your request for in-depth information and follow-up. Your request is totally confidential.

Executive Education RFI

The Logistics and Supply Chain Education RFI can help you identify the schools, coursework, continuing education, distance learning and certification opportunities available from leading logistics educational institutions.

Upgrade and improve your logistics and supply chain skillsets. Whatever route you choose—advanced degree, executive education, certification or distance learning—the time and money you invest in your education today can pay off in continued career success tomorrow. Contact leading universities and professional institutions for the information you need to prepare for the future.

Third Party Logistics RFP/RFI

This 3PL Request for Proposal (RFP)/Request for Information (RFI) can help you find the 3PL and 4PL providers that can meet your specific 3PL service challenges and needs. The 3PL companies below will provide free, no-obligation third-party logistics advice, solutions, and information.

Ask your 3PL questions, you'll get answers. Simply complete the information, and detail your 3PL challenges. Then, check off the third-party logistics companies that you want to review your request.

1. Choose an RFI topic.
2. Enter your contact information and challenge.
3. Select companies and optional categories.
4. Submit.


2

Your Information



Your Challenge, Problem or Request *

3

Select Transportation Companies

  • Select All

  • 3Gtms
  • BluJay Solutions
  • CSX Trans. Intermodal
  • Kuebix
  • Landstar
  • Legacy Supply Chain Svs.
  • One Network
  • Pitt Ohio
  • Purolator
  • Quintiq
  • SEKO Logistics
  • SMC3


Select Relevent Categories

  • Air Freight
  • Intermodal
  • Motor Freight
  • Ocean Freight
  • Rail Freight
  • TMS

Select Warehouse/DC Management Companies

  • Select All

  • 3PL Central
  • Apex Supply Chain Tech.
  • Honeywell Intelligrated
  • Kuebix
  • Legacy Supply Chain Svs.
  • Swisslog
  • Westfalia Technologies
  • Zebra Technologies


Select Relevent Categories

  • Auto ID & Data Capture
  • Automation
  • Conveyors & Sortation
  • Lift Trucks
  • Packaging & Labeling
  • Pallets & Containers
  • Shelving & Racking
  • WMS

Select Supply Chain Companies

  • Select All

  • 3Gtms
  • 3PL Central
  • Amber Road
  • Apex Supply Chain Tech.
  • APICS
  • BluJay Solutions
  • CSX Trans. Intermodal
  • Frontier Business
  • Kuebix
  • Legacy Supply Chain Svs.
  • Logility
  • One Network
  • Purolator
  • Quintiq
  • SMC3
  • Synchrono
  • TAKE Supply Chain
  • Westfalia Technologies
  • Zebra Technologies


Select Relevent Categories

  • Global Trade
  • Inventory Management
  • Risk Management
  • Sustainability

Select Software/Technology Companies

  • Select All

  • 3GTMS
  • 3PL Central
  • Apex Supply Chain Tech.
  • BluJay Solutions
  • Honeywell Intelligrated
  • Frontier Business
  • Kuebix
  • Logility
  • One Network
  • Quintiq
  • SMC3
  • Swisslog Logistics
  • Synchrono
  • TAKE Supply Chain
  • Zebra Technologies


Select Relevent Categories

  • ERP
  • Sales & Operations
  • Sourcing/Procurement
  • Optimization
  • Transportation Mgmt
  • Warehouse Mgmt

Select Executive Education Choices

  • Select All

  • Graduate Courses
  • Online/Distance
  • Executive Education
  • Certifications
  • Undergraduate
  • Seminars
  • Associations
  • Conferences
  • Tradeshows


Select Third Party Logistics Companies

  • Select All

  • 3PL Central
  • Landstar
  • Legacy Supply Chain Svs.
  • Purolator
  • SEKO Logistics
  • Westfalia Technologies


4
 

24|7 Company Profiles