Sunday, May 4, 2014

MEGA SHIPS, CONTAINER LINES, & SUPPLY CHAINS

Let us start with some basics. Carriers have built large ships without knowing where and how to use them. Incredible, but true. Maybe 70% of shippers do not know what they are buying; all they know it is "cheap" as told to them by a freight forwarder or ocean carrier. So let us focus on the few who are buying a service and selling a service to meet customer needs--a hint of real customer-centric. If you are buying transport for a supply chain, the first thing you need is dependable service. That is lacking. With skipped schedules, slow-steaming, schedule changes, alliance changes, and add whatever else you want, container line service is undependable in every meaning. 
 

How do you fill a supply chain with such service? The only option is to carry extra and unnecessary inventory through the entire supply chain. So carriers have to start with fundamentals---dependable service. Then carriers have to differentiate their service offerings. Why do they charge the same rate for a 12 day transit as for a 17 day service? That makes no sense and further commoditizes carriers and what they sell. That means only price matters.  I am talking basics here that have gone out the window by both sellers and buyers. That has to be fixed first before we can get into serious supply chain discussions that create value for customers and separation from carriers who only play the price/fill-the-ship games.

I have directed global supply chains and what carriers are doing now are the antithesis of what is needed to run a responsive, pull-driven, supply chain.

The railroad industry is a classic study in myopia. They saw themselves as transportation by rail. They did not understand their customers. They did not see the total transport picture. They took a narrow view and it eventually killed their future so that is now so limited and exists much for something they were lucky to have happen, international and the transport of containers. Container lines exemplify insanity--doing the same things over and over. Their only exercise has been bigger and bigger ships--to the point where they may have finally kicked the can too far down the road with the megas. Ocean carriers have lost basically all focus on customers and their business and their supply chains. It's all about filling ships and freight rates. And now they are bordering on a catastrophe and clinging the the thread of a bigger ship saving their butts. They have taken shippers down the rabbit hole too many times. It is time for both parties to put the bull aside and figure out where we go. If not, you and I will have this same discussion as an annual exercise. 

I have come to believe that container lines may be the biggest driver to reshoring.