Megatrends in ocean freight

Ship owners are investing in optimization, but now the shipper has a role to play in helping an operator innovate by adjusting their own operations and aligning to be a desirable partner.

By ·

You might be expecting a timely column on ocean trade with insight into the new weighing requirements and how shippers are struggling to meet the new IMO rules.

However, that’s not the theme of this column. Instead, I’m going to focus on four historic vectors—all related to capacity—that are now converging to make a significant impact on the multi-billion dollar ocean freight market, especially where shippers are concerned.

The first is the extraordinary increase in TEU capacity on the ultra-class ships—and even more alarming is the fact that carriers report they have even more huge ships on order for the next several years. The TEU capacity on newer vessels is 14,000 units to 18,000 units, with rumors that it will go even higher.

The capacity has grown about 25% in the past five years and stands today at over 20 million TEUs. Even though vessel owners are scrapping 400,000 TEU’s this year, by some estimates there will continue to be excess in many trade lanes for some time to come.

Second, current Panama Canal and port expansions in the Americas are facilitating faster movement of larger vessels. The effect is more capacity arriving with each vessel and more frequently—a change that, by definition, equals a capacity increase. This also means that shippers have an opportunity to align their routes from suppliers and to customers with higher capacity lanes to improve service and cost at the same time.

Third, consolidations between major carriers are moving ahead on two fronts: There are contractual capacity sharing agreements and there are mergers. In the first case, carriers are trying to reduce port calls for each vessel, covering the service commitment with a partner’s vessel.

Mergers are efficiency plays to reduce overhead and potential competitors. Larger companies can afford larger ships with better operating efficiencies and are ordering them. In the meantime, shippers need to spend time with service providers and carriers to understand their strategy and align their service requirements with the ones the carrier is actually optimizing.

The fourth vector has to do with capacity that’s created through technology. By having instant access to vessel space options and schedules, vessel operators are now more aware of space options at all times. With fixed sailing dates, the ocean carrier is limited as to what cargo they can match up with their vessels; however, the capacity sharing agreements and larger vessels are creating real options.

Tracking all these options and presenting price and service scenarios to shippers calls for dynamic, connected apps for all parties involved in the transaction. Fortunately, the applications are in place from Uber-type apps in ocean and offer the capability to continuously plan. In fact, large firms are already investing in technology from vessel propulsion to cargo booking systems. Once again we see innovation creating opportunity.

In the short run, shippers benefit as operators scramble to be best in class and competitive in cost while meeting margin requirements. And it’s true that the shipper has the advantage when just physical capacity is considered, but as we understand the changes taking place in the vessel operators’ business, we should be aware that time for beating up service providers on price is coming to an end.

Ship owners are investing in optimization, but now the shipper has a role to play in helping an operator innovate by adjusting their own operations and aligning to be a desirable partner. Starting today, ocean shippers should be exploring any and all opportunities to improve cost and service while the carriers are going through significant operational changes.

About the Author

Peter Moore
Peter Moore is Adjunct Professor of Supply Chain at Georgia College EMBA Program, Program Faculty at the Center for Executive Education at the University of Tennessee, and Adjunct Professor at the University of South Carolina Beaufort. Peter writes from his home in Hilton Head Island, S.C., and can be reached at [ protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.

Article Topics

Ocean Freight · All Topics
Latest Whitepaper
How to Conquer Cross-Border Shipping Challenges
Cross-border truckload and intermodal shipping has increased greatly over the past decade and shows no signs of slowing.
Download Today!
From the September 2018 Logistics Management Magazine
Gourmet ice pop maker adopts collaborative cold chain solution to keep profits from melting away due to costly logistics challenges—and takes home a 2018 Alliance Award in the process.
Trinchero Family Estates’s Warehouse / DC: Pallet handling in the vineyard
2019 Alliance Awards: Time to share your collaboration success
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly newsletter!
Latest Webcast
Five Ways to Reduce Freight Costs with Easier Data Analytics
For most shippers, the challenge to reduce freight spend isn’t about setting up cost-saving programs. It’s about gaining visibility into shipping data to support their decisions. Join us to learn how transportation-focused data analytics tools are facilitating easier decision making for shippers.
Register Today!
Transportation Best Practices and Trends: Frios’ cool solution for a hot seller
Gourmet ice pop maker adopts collaborative cold chain solution to keep profits from melting away due...
35th Annual Quest for Quality Awards: Scaling to new heights of service
Which carriers, third-party logistics providers and U.S. ports have reached the pinnacle of...

29th Annual State of Logistics Report: Carriers take the wheel
As if higher rates and capacity shortages weren’t enough to worry about, shippers must now deal...
Labor Crisis: A proactive approach to filling Logistics Jobs
A tight labor market driven by the uptick in e-commerce, increased omni-channel distribution...
mitsubishi l200 купить

купить аккумулятор forse в Украине

У нашей организации нужный сайт , он описывает в статьях про Гинекология в Германии