Introduction:
Think global trade is a 7 x 24 operation? Think again. Few realize that some of the largest ports in the US are open only Monday-Friday, 8 AM-5 PM — ‘banker’s hours.’ In fact, bankers have longer hours these days. Most shippers know that much of the world’s freight sits idly on ocean containers for ~30 days. But once it arrives — “We have the weekend off.”1
On the outbound side from Asia, carriers have canceled sailings and it appears they intend to do more in the coming months. So your container can be sitting at the dock ‘all dressed up with no place to go’ waiting for the next sailing.2 Ocean ships deliberately slow down, they say, to save fuel, adding days to an ocean voyage. But does that slowdown support the shippers’ overall objective of improving time-to-market and reducing inventory?
The port news is awash with labor issues at the docks, the latest being at the Port of Vancouver, where truck drivers protested. You may think the violence there was a result of a wage dispute. No. Truck drivers were protesting the long wait times. They spend their day waiting to pick up freight.3 On the East Coast, at the Port of New York, truckers say “they wait hours for chassis at equipment yards.”4
How about the renaissance of rail? Cheaper, greener? But wait. Products await transportation for days, weeks, or even months before their ‘turn comes.’ In the Northwest, for example, where the transportation industry is making hay of the oil boom, grain products sit waiting in silos unable to compete with the high shipping rates that energy companies are willing to pay.
The Gilded Age?
Students of history will remember the days of the Vanderbilts, Jay Gould, and James Fisk, and ultimately, the monopolization of the national rail system.5 History will also point to the fact that the game Monopoly was developed during the times of the gilded age,6 when a few controlled the transportation systems, energy, steel, and other industries of the country. Although there may not be a monopoly today, the US rail system has four major players. Limited competition means fewer options for shippers.7
Though ocean has more players, they are working diligently to get alliances approved.8 Once approved, these alliances will consolidate routes and probably drop some direct shipping lanes, driving shippers to transship between ports, adding time and cost to the trip. (Read Disadvantages of Transshipping.9) This will surely have an impact on the food industry that relies on freshness. For frozen items, the cost of container shipping will go up. Again more speed bumps overall.
And of course, there is air — faster, maybe not cheaper. But the flights actually have to take off. This winter has seen more flight cancellations than in history for both passenger and commercial air travel.10
Trucking — new driver hours. Yes, it’s safer. But de facto, that reduces capacity. And as we previously stated, truckers already face long wait times all along the supply chain: sitting at gates at ports, being detained or delayed at warehouses, etc. The problem is so bad, in fact, that the head of the US Department of Transportation has vowed to pass legislation to fine customers11 for the detention times truckers have to wait.
But We Are in the Information Age, Not the Gilded Age
Another factoid it was no surprise to hear, but is still shocking in today’s so-called information age, is that about half of all the shipping paperwork (Bills of Lading) in international shipping is still paper-based. Talk about slowing down the process, what to say of the inaccuracies in communication that result. How many businesses today run their complex businesses on spreadsheets and fax? Many. And these produce huge errors that result in late and missed shipments and chargebacks to the shipper for errors.
On one hand, we talk about mobile, social, the web, and a faster, real-time supply chain, and on the other, we still have all these speed bumps. Yet the desire for that real-time, ever-faster supply chain remains.12
Compound all this with the issues surrounding the freight itself: cold, on time, secure. We want all that too. We want custom/build-to-order, more choice and richer segmentation: diversified product offerings and special packaging by segment, all with faster cycle and inventory turns.
Performance means: Cool. Secure. Visible. On time. Safe. Right price. Fresh. Fast.
Customers want fast — fast ship, same day, no delay. Oh, and transportation should not cost too much.13
Can We Have It All?
That is why transportation technology — visibility, B2B communications, TMS, RFID, traceability, and other applications — are so important to the industry. Every little innovation is a large victory for these performance goals. There are huge challenges to confront, and money to be made and saved in your supply chain. And that is why, over the year, ChainLink will devote this column to discussing the issues in transportation and trade.
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1 Recently, some ports have instituted additional hours to accommodate the demand. However, with larger vessels that carry more containers arriving into the US ports, the problem will continue to plague the transportation industry. Many shippers are adding more inventory to accommodate delays. — Return to article text above
2 Journal of Commerce March 3rd, 2014 V.15 N.5 — Return to article text above
3 More on this story here: http://www.timescolonist.com/business/port-truckers-face-order-to-endike-1.919088 — Return to article text above
4 Journal of Commerce March 17th 2014 — Return to article text above
5 From this was born the oil pipeline, Rockefeller’s innovation to circumvent the high prices Vanderbilt was charging him to transport oil. — Return to article text above
6 http://en.wikipedia.org/wiki/History_of_the_board_game_Monopoly — Return to article text above
7 You can read more about this at the Alliance for Rail Competition http://www.railcompetition.org/about_arc. “ARC is a diverse group of shippers and industry trade associations that formally organized in March of 1997 in response to growing concerns over deteriorating rail service. Members of ARC are captive shippers that do not have access to the benefits of the Staggers Rail Act of 1980. They include a broad cross-section of industry segments, including: agriculture, coal consumers, consumer and industrial products, chemicals, minerals and petrochemicals.” — Return to article text above
8 The P3 alliance was approved just as we were writing this story. The full impact will not be known for a while, plus there are other pending partnerships. — Return to article text above
9 http://www.joc.com/international-logistics/transshipping%E2%80%99s-disadvantages_20140321.html#comment-3196 — Return to article text above
10 For more great insights on air schedules you can read the cover story in Time Magazine Inside the Strange World of Airline Cancellations http://content.time.com/time/magazine/article/0,9171,2166055,00.html — Return to article text above
11 Ports and shippers and customers who can unload — Return to article text above
12 Read the Journey to Visibility — Return to article text above
13 Even supply chain professionals — unless they work the freight process and spend issues daily as shippers or transportation professionals — lack the knowledge of all the issues and why things cost what they do. — Return to article text above
To view other articles from this issue of the brief, click here.