Rate obsession
In April, Philadelphia-based logistics company BDP International found that nearly three of four logistics executives felt the financial benefits of slow steaming for carriers should be shared with shippers.
BDP, along with its Centrx consulting unit and Saint Joseph's University, surveyed 290 executives in a study whose findings were first revealed by American Shipper in late May ('Shippers want piece of slow steaming savings,' www.AmericanShipper.com/links ).
The survey found that respondents felt shippers should get improved customer service or offsetting of future rate increases if not outright rate savings at present.
It was a fascinating reveal, amidst a general lack of clarity on how exactly shippers are benefiting from carriers sailing more slowly. The focus on improved service is encouraging, but shippers wanting lower rates in return for accepting slow-steaming practices should be careful of treading a dangerous path.
Demanding better reliability in exchange for slower vessel speeds is understandable, perhaps even advisable. But linking the price of container transport primarily to the speed of the vessel transporting it could lead to a continuation of bad habits. The price of a service should be related to all aspects of a service, not something as simple as vessel speed.
We've argued before in this space that carriers need to offer differentiated services ' a variety of price plateaus with corresponding levels of service. But merely correlating the speed of a ship with the freight rate is a dumbed-down version of that principle.
What cargo owners and non-vessel-operating common carriers seem to be saying in the BDP survey is that they ought to be getting something for having taken on the burden of slower transit times, and lower rates is the easiest foothold on which to grab. It's understandable when you think about things like mail or parcel services. You pay $10 for same-day delivery, $5 for next-day, $2 for second-day and $1 for five days. That sort of thinking is ingrained in our DNA.
But container shipping is a more delicate dance. A box of goods is usually consolidated in a foreign warehouse and trucked to a foreign port before it's loaded on a ship. After it reaches its destination port, the same happens in reverse. So there are moving parts on the front and back ends, both ultimately reliant on the reliability of the carrier in that crucial middle stage.
Shippers are short-changing the value of the whole system they've created if they focus on the slowness of the vessel transit, not the on-time nature of that transit, and want monetary compensation for it.
Yes, slower vessel speeds translate directly to higher inventory-carrying costs, but that's something shippers on long-haul routes should be accustomed to already. Most services from Asia have been slow steaming for a while now ' it's a cost that shippers should have factored into their budgets this year.
The BDP survey found that 85 percent of respondents indicated they have adapted, or are planning to adapt, their supply chains to slow steaming. It really should be closer to 100 percent.
A benefit of more robust inventory levels is that it can translate into less vulnerability in terms of stockouts ' a benefit that was ignored in the rush to just-in-time everything. Also bear in mind that slow steaming has much less of an impact on head-haul legs.
So instead of focusing on slight cost benefits, shippers should be constructively channeling the ire created by slow steaming into demanding that carriers perform better when it comes to on-time reliability.
It's easy to trot out a list of issues that prevent carriers from being more regularly on time, but the real reason they aren't on time more often is that shippers haven't demanded it of them.
GSF biting off more than it can chew?
The Global Shippers' Forum is taking steps to become a more heavyweight voice in the international business and political community.
American Shipper reported in late May that the GSF, which has previously represented shippers' councils in North America, Europe and Asia, as well as some in Africa and Oceania, has obtained nonprofit status in the United Kingdom ('Global shippers forum seeks NGO status,' www.AmericanShipper.com/links ).
The move will allow the GSF to 'more fully participate in the key international bodies where decisions are taken which impact shippers everywhere,' said Chris Welsh, the GSF's new secretary general, specifically mentioning the International Maritime Organization, International Civil Aviation Organization, International Labor Organization and World Customs Organization.
But the move has already divided the ranks of the organization. The European Shippers' Council, a key cog in the development of the GSF, and the Tripartite Shippers' Group before it, has opted out.
The move, said Nicolette van der Jagt, secretary general of the European Shippers' Council, was not based on policy disagreement, but a different view of the GSF.
New GSF Chairman Bob Ballantyne said he felt the ESC wanted the GSF to continue as it was, an annual 'talk shop,' whereas other groups wanted the forum to gain more global clout.
It's not the first time a major shippers' council has broken away from the group. The Japan Shippers' Council declined to support the Asian Shippers' Council in the latter's push for an end to antitrust exemption for
carriers. That issue was particular to the characteristics of Japan, where carriers and major shippers are often closely tied.
The problem the GSF faces as it attempts to expand its influence is that shippers are hardly a homogenous group, even within a tight geographical region. They vary in size, philosophy, strategy and culture. To expect shippers in a predominantly import-based region to be obsessed with the same issues as those from an export-focused region is a bit fanciful. The Asian Shippers' Council has, for instance, long pushed for a greater understanding of the burdens small export shippers in Asia face, but to little avail.
A GSF with a stronger voice will help get things accomplished, but the question is whether the shippers who have more severe problems will be the ones who benefit. Large shippers in developed economies already enjoy a good amount of leverage. In the United States, they've aligned themselves with powerful and entrenched lobbying bodies like the Waterfront Coalition or the Retail Industry Leaders' Association.
The shippers who need a global voice are those with no one listening to them now. If the GSF is to succeed in its ambitions, it would do well to push the agenda of those shippers, not the ones who already have a voice.