ocean shipping Archives

When it Comes to Ocean Shipping, We Have to See Beyond Today’s Squalls and Plan for the Long Term

Supply Chain Visibility | By Mathew Elenjickal • 11/02/2021

I can only imagine what it must be like to be at sea during a major storm. When you can barely see beyond the bow of the ship, when extreme wind and waves threaten to throw you off course – or worse, sink you – it’s understandable that long-term thinking can get chucked overboard like so much extra ballast. It’s all about plowing through the next wave. And the one after that, and the one after that, until you’ve managed to steer your way through to blue skies and calm waters.

It’s an apt metaphor for ocean shipping these past many months. Every day has felt like a major squall, from natural disasters closing down manufacturing facilities and ports, to container shortages and labor issues, to rising costs and the ongoing pandemic. It has been the opposite of smooth sailing, and many companies understandably have fallen back almost exclusively on short-term thinking. How do I get shipment X out of Long Beach? Can I stack two more levels of containers on every chassis? Can I secure a dedicated ship to see me through near-term shortages?

But the fact of the matter is, industry leaders who want to avoid crashing their business on the shoals need to balance the daily hand-to-hand combat with some serious, long-term planning. They need to rally their organizations to think strategically about how ocean shipping is fundamentally changing, and marshal the company’s intellectual and financial resources for long-term adjustments.

We may never have a ‘new normal,’ but a new reality is shaping up

When you look back 18 months to the start of the pandemic, the first shock waves to hit global supply chains were all related to demand. Empty grocery store shelves. Toilet paper hoarding. A lack of basic necessities. What wasn’t given due consideration was the impact of the demand shock upstream, through the supply chain, right to the suppliers.

Instead, the short-term, reflexive thinking was, Let’s get everyone producing a lot more. That led – inevitably – to a surge in goods, but also to an inability to get all those goods into scarce containers, or to get the containers onto ships, or to get the ships through clogged up ports, or to get the ships unloaded. And the list goes on.

The first new reality? Demand volatility is here to stay. So let’s plan for it. (I’d argue that had Walmart or Home Depot been thinking big picture and long term, they would have chartered their own ships 10 months ago!)

The second new reality: Equipment constraints and labor constraints are intertwined — and both will be with us for a while. While labor issues tend to garner more headlines, ocean shipping is dealing with a combination of equipment constraints and labor constraints, and you cannot solve one without the other. You can put more containers on a chassis, but if there aren’t enough people to move the goods, it’s of no use. Likewise, labor can’t do its thing when there are severe equipment shortages, and rectifying those shortages requires difficult-to-source raw materials.

The third new reality: Consolidation is inevitable. It was recently reported that one of the world’s biggest container logistics companies, Maersk, will only handle cargo from direct shippers, cutting out freight forwarders. And while no official announcement had been made as of the writing of this article, it’s clear that “Maersk is giving a greater priority to those that will take door-to-door or will use more of Maersk’s integrated services.”

What are the implications of the No. 1 carrier stopping its dealings with even a portion of the world’s freight forwarders? It seems to me small freight forwarders, in particular, are at risk. And should a significant number of small freight forwarders go out of business, who are the smaller importers going to work with to secure capacity? I’m of the opinion that the companies that control the equipment are in the strongest position. But what are the long-term implications of these kinds of fundamental shifts in the power dynamics of ocean shipping?

A “planful” way forward

Move from short-term to long-term scenario planning. The companies that will fare better over the long haul are those that think through the bigger-picture implications of these seismic shifts, so they can devise new systems and workflows — even new business models — to minimize repercussions up and down their supply chains. This includes reevaluating resource allocation. It means making smart investments in everything from network modeling to ocean trade lane analysis, from securing equipment to potentially rebalancing nearshoring and offshoring strategies.

Factor in big-picture industry changes. Scenario planning should take into account significant changes to the industry landscape. Which industries will survive? Who is going to go out of business? What new industries will pop up? When people talk about self-driving trucks, whatever their opinion on the technology, they tend to overlook the industries that might be disrupted. If fewer humans are driving the trucks, what does that mean for the insurance industry that used to insure those humans, as just one example?

Take full advantage of modern technology. There’s no question the pandemic radically accelerated digital transformation initiatives across the supply chain industry. The companies that will survive and thrive going forward will continue to leverage the latest and best technologies to remediate both the day-to-day challenges and plan for the long term. Push your tech partners to ensure that your solutions are underpinned by the highest-quality data that can be securely shared across other systems and with your network. Insist on state-of-the art forecasting and decision tools. Demand an ever-increasing pace of integration and innovation.

What ocean shipping needs is what former General Electric Chairman and CEO Jack Welch used to preach: “Anybody can manage short. Anybody can manage long. Balancing those two things is what management is.” That’s never been more true; more long-term thinking is ocean shipping’s best path out of stormy seas.

Matt Elenjickal is the Founder and Chief Executive Officer of FourKites. He founded FourKites in 2014 after recognizing pain points in the logistics industry and designing elegant and effective systems to address them. Prior to founding FourKites, Matt spent 7 years in the enterprise software space working for market leaders such as Oracle Corp and i2 Technologies/JDA Software Group. Matt has led high-impact teams that implemented logistics strategies and systems at P&G, Nestle, Kraft, Anheuser-Busch Inbev, Tyco, Argos and Nokia across North America, Western Europe and Latin America. Matt is passionate about logistics and supply chain management and has a keen sense for how technology can disrupt traditional silo-based planning and execution. Matt holds a BS in Mechanical Engineering from College of Engineering, Guindy, an MS in Industrial Engineering and Management Science from Northwestern University, and an MBA from Northwestern’s Kellogg School of Management. He lives in Chicago.

What’s Happening to Global Trade?

Global Trade | By Clint Reiser • 03/02/2016

What is happening to global trade? You may ask, “What do you mean?” Well, I think a quote from a World Trade Organization (WTO) September press release describes the situation the best:

“If current projections are realised, 2015 will mark the fourth consecutive year in which annual trade growth has fallen below 3 per cent and the fourth year where trade has grown at roughly the same rate as world GDP, rather than twice as fast, as was the case in the 1990s and early 2000s.” (Emphasis mine)

Global trade has been growing at about twice the rate of global GDP for most of the last 20 years. This growth has been especially beneficial to the logistics industry and the technology vendors and others that support logistics operations. Given the importance of trade growth to the logistics industry, I decided to dig beneath the headlines to obtain a better understanding of the what, when, where, and how of this global trade slowdown.

The adjacent image is a chart of data from the IMF. It provides visual perspective to the WTO quote above. Just from looking at this chart, it is apparent that global trade growth is more volatile global GDP growth. However, the second takeaway is that both data sets have been running in virtual lock-step since 2012, confirming the statement by the WTO. Global trade growth has settled to global GDP growth rates.

Digging Deeper Into the Specifics
Clearly global GDP growth, and global trade are about as all-inclusive as economic data can get. Is trade slowing across all regions, all cargo types, and all routes, or are there specific segments of the market that are dragging down the global aggregate data? The WTO publishes quarterly import and export trade volumes by region. The accompanying charts show quarterly export and import trends by region. North America and Europe look stable to strong over 2014 and 2015 Q1. In contrast, Asia and Other (CIS, Middle East, Africa) show a notable decline over that same period. At the same time, imports by South America and Other declined substantially. The WTO attributed the South America downturn to Brazil’s combination of fiscal difficulties and declining export prices (presumably reducing the country’s aggregate purchasing power).

The slowdowns in these shipping routes are pressuring freight rates across commodity classes. Drewry stated in its Dry Bulk Forecaster that China’s slowdown is negatively impacting iron ore and coal shipping demand. Meanwhile, the Wall-Street Journal reported that approximately 690 dry-bulk ships across the globe are currently sitting idle. However, this supply-demand mismatch is also a result of increased shipping capacity that has become available. Drewry also noted that there is a supply-demand imbalance in the container shipping segment, with the idle fleet near one million twenty-foot equivalents.

What about the US? Cass/Inttra published its ocean freight index through May 2015 (and halted publication thereafter). However, US container import activity looked stable in the first five months of 2015, but US exports were noticably weaker than the prior three years (see chart). It is difficult to determine if the slowdown in US exports is a result of slowing economies overseas, or if it is a result of the strengthening US dollar, leading to US exports being replaced by cheaper alternatives.

Conclusion
From a regional perspective, this data supports the view that diminishing demand in China, likely from reductions in infrastructure spending, is a root cause of the slowdown. Additionally, Brazil appears to be experiencing the strongest secondary effects from commodity price declines (reduced foreign capital from exports, leading to reduced capacity to import other goods). Also, I believe that the trade volume data provides support for the thesis that oil price declines are at least partially resulting from slowdowns in demand, as opposed to being exclusively a supply-side issue. In contrast, it is my opinion that other slowdowns in trade are residuals from the root causes listed above. Therefore, I believe pricing declines outside of bulk commodity transport will be more transitory and are more of a result of increased shipping capacity. Finally, let’s remember, all of this data is backward looking. So let’s hope this is only a temporary bump in the road that is now in our rearview mirror.

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IoT Visibility Comes to Ocean Shipping

Business Intelligence | By Steve Banker • 02/22/2016

The ocean shipping industry has traditionally used EDI for shipment tendering, booking and milestone tracking. A new solution has emerged that leverages near real time vessel tracking data to improve shipment planning and tracking.

The Internet of Things (IoT) is nothing new in logistics. In the logistics space, for example, we’ve been taking RF scans and using that data to improve warehouse processes since at least 1975. Internet protocols make it easier to communicate sensor data to applications, which has led to better and cheaper applications. And, in ocean shipping, IoT data that has long existed. However, it was not being leveraged to improve visibility and carrier scheduling.

In ocean, big carriers have traditionally interacted with shippers and freight forwarders using EDI messages to update interested parties on estimated times of departures, estimated times of arrival, and other pertinent status messages (vessel arrived at port, container gated in, loaded and departed full, etc.) EDI event data is better than having to proactively call carriers or look at carrier portals. But EDI, which depends upon carrier performance, can have problems. It is common for logisticians to refer to ASNs – which stands for Advance Ship Notices – as “Already Shipped Notices.” Unfortunately, while that “joke” applies to all transportation modes, it is particularly applicable for ocean.

And yet a rich stream of real time data has long been available to improve ocean visibility. The Automatic Identification System (AIS) is an automatic tracking system used on ships for identifying and locating vessels by electronically exchanging data with other nearby ships, AIS base stations, and GPS satellites. AIS was intended to help ships avoid collisions, as well as assisting port authorities to better control sea traffic, but CargoSmart is doing something new – they are using this near real time data (vessel details are updated every 15 minutes) to improve vessel scheduling and shipment tracking.

CargoSmart Limited, launched in 2000 as a provider of cloud EDI solutions focused on ocean booking and tracking, the company provides software solutions that enable shippers, consignees, 3PLs, freight forwarders, and ocean carriers to improve planning and on-time deliveries.

Simplistically, it would be easy to view EDI as the old way of doing things, and view IoT data as the newer and superior form of data. But they are not quite the same. EDI is a data transmission protocol for shippers’ and carriers’ shipment updates, while AIS is actual data – and that data must be put in context to become useful. To improve scheduling and shipment tracking, CargoSmart is doing just that – they are leveraging the AIS data, combining that data with EDI status messages and route schedules, and then layering in other data (schedule pattern analysis, port and carrier news alerts, and weather maps). Without EDI shipment milestone data, the AIS data would have much more limited value. CargoSmart is truly a player in the field of shipping digitization and Big Data.

CargoSmart’s Big Schedules

While CargoSmart has emerged as an IoT solution provider – and are using AIS and other data sources to track vessel level performance – the company still provides more traditional solutions. Many freight forwarders are using CargoSmart’s enterprise solutions to tailor schedules for their customers and provide schedule delay alerts only for the vessels that impact their customers’ shipments. These solutions – Private Label Sailing Schedules and Schedule Delay Alert – are currently based on sailing schedule data that the carriers provide. CargoSmart’s product development plans are to add the news incidents data to Private Label Sailing Schedules and Schedule Delay Alert products.

Where IoT data exists, like AIS, building a new application that leverages this data seems obvious, particularly in retrospect. But while the idea is obvious, I0T and Big Data are almost synonymous. Gathering, cleansing, normalizing and using predictive analytics to improve schedule decision-making is far from a trivial exercise.

Providers of Ocean Shipping Solutions

Logistics Software Vendors | By Steve Banker • 03/29/2010

Since I am in the process of updating our Transportation Management Systems (TMS) Worldwide Market Outlook study, I was recently briefed by INTTRA and CargoSmart, two providers of ocean tendering and execution solutions.

INTTRA is a privately-held company headquartered in New Jersey with more than 270 professionals located in eleven countries. The company offers the largest multi-carrier e-commerce platform for the ocean shipping industry. In terms of the TMS study, INNTRA is a provider of ocean transportation execution services.

Demand for single instance, multitenant software-as-a-service (SaaS) solutions has grown in recent years, particularly in the transportation management industry where the value of a network is most evident. INTTRA and CargoSmart have always had a network-based architecture.

INTTRA connects to 30 ocean carriers which represent about 80 percent of the world’s container shipping capacity. These carriers, in turn, are connected to more than 20,000 companies. More than 300,000 full container load orders are initiated on the INTTRA platform each week. This represents roughly 10 percent of global ocean container trade. While INTTRA enables shippers, freight forwarders, third-party logistics providers, brokers and importers to electronically plan, process and manage their shipments fast and efficiently (replacing the traditional use of faxes and phone calls), the transactions are paid for by the ocean carriers.

In some ways, what INTTRA provides is simple—i.e., there is no complex optimization involved. However, networked solution providers tend to start with simple solutions, which get more complex over time and ultimately lead to optimization capabilities getting added. INTTRA is at the very beginning stages of this process.

INNTRA’s new eInvoicing solution is a good example of the differentiated value a network-based solution can provide. Because INNTRA sits in the middle of buyers and sellers, and receives information from both sides, it is ideally positioned to help manage disputes by reconciling payments with invoices. Without a neutral broker in the middle, these kinds of disputes can drag on for months and require substantial labor and paperwork on both sides to resolve. The reconciliation process now becomes easier and less costly.

CargoSmart is another SaaS network provider that supports ocean execution processes. The company’s network includes 19 ocean carriers (75 percent of the top 20) and is used by 17,000 companies in North America, Asia, and Europe. Shippers can execute ocean shipments on CargoSmart’s platform—e.g., importers and exporters can look up vessel schedules, submit booking requests and shipping instructions, and print bills of lading (B/Ls). The solution also includes centralized storage of electronic documents and it supports ocean trade compliance requirements, such as Automated Export System, Importer Security Filing (aka 10+2), and China’s 24-hr rule documents, which are all important in executing ocean moves.

CargoSmart is ahead of INTRRA in terms of providing more complex supply chain solutions like visibility. The solution offers robust ocean event management capabilities, as well as visibility to multimodal shipments if the ocean carrier is responsible for rail moves. Multi-partner visibility and task management allows a shipping manager to assign tasks to co-workers and supply chain partners across various departments and nodes. Event management includes not just current estimated times of arrival and departure, but it also displays more than 20 milestone events, from empty container pickup through empty container return. Several of these events can help shippers avoid detention and demurrage charges. In other cases, these events can help shippers track more complex moves, such as ships that need to arrive at a transshipment port and be unloaded promptly in order to ship out on time. The solution also provides EDI performance reports that allow shippers to monitor the quality of information they are receiving from their carriers.

Other providers of ocean tendering and visibility solutions include Descartes and GT Nexus. I am out of space today, but I’ll comment on these providers down the road.

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