Monday, May 5, 2014

SUPPLY CHAINS & MEGA SHIPS

Carriers made this mess. Yes, shippers/forwarders want cheap rates. But carriers could have said no. Instead they chased--and still chase the game of market share--which means cutting prices. Let us think it through. I have a container that I need to deliver to Chicago. Carriers could have said no on low rates. They held all the cards. What was the shipper to do? Fly it at 10 times the cost of ocean? But carriers did not do that. They collectively--as in collusion--cut capacity in 2009 to drive rates back up. And then put the capacity back and did the same thing that got them in trouble in the first--and maybe the 34th time. We have gone from 1000 TEU ships to 18,000 TEU ships and nothing has changed.

Supply chain executives must take control of their supply chains. The impact to their firms as to unnecessary, additional inventory and customer service/lost sales has to stop. Otherwise a lot of these supply chain execs should be fired. This is line in the sand time. Carriers have to stop playing to the lowest denominator.