Monday, February 16, 2015

CONTAINER LINES, SKIPPED SAILINGS, CUSTOMERS, SUPPLY CHAINS

Below is a letter I sent to the editor of American Shipper for their article on skipped sailings--
 
Skipped sailings hurt supply chains down the line

   In Ben Meyer’s Container Analytics column, “Skipped sailings still on the rise,” in the February issue, he has hit on an important topic. He discussed it with regards to overcapacity and carrier attempts to adjust it. 

   However, there is another take on blank sailings—slow steaming, schedule revisions, alliance changes, alliance operations, and other actions.  It goes beyond the transpacific and occurs throughout all the trade lanes. Also, skipped sailings as a global problem may continue—and grow—with more ultra-large/mega ships and the corollary moving of large ships into other trades. All this adds overcapacity.

   Steamship lines are not operating in a vacuum. There are impacts to what carriers are doing to adjust capacity that go beyond their own needs.

Carriers are selling a transport service. But what about the reliability of that service caused by dropped sailings and other actions?  The movements of containers represent many supply chains.

   Supply chains are based on the flow of products. There are build and logistics plans, often in weekly buckets, to manage the production and movement of materials and finished goods.  Implicit in these plans is the schedule and performance integrity of container lines.

   Steamship lines’ skipped sailings impact buyers, sellers, and related parties. The effect may be greatest on multinational corporations.  They have suppliers, factories, and customers in many trade lanes. The geographic scope and complexity of these supply chains demand reliability by all stakeholders and participants.

   Carrier actions that make their services undependable have negative consequences on these supply chains. Multinational corporations and others in global trade must invest in additional inventories to buffer these service vagaries. These buffer inventories are unnecessary working capital spent because of carrier performance erosion. These monies could have been used to grow sales, open new markets, improve operations, or add needed technologies.

   Looked at another way, these are not just supply chains, they are customers and their businesses. The industry has a suspect record with its on-time performance. Yet, they are selling a service. What does this say about the container lines and the service they are selling? What are their customers actually buying?

   And, American Shipper, keep paying attention to that man behind the green curtain—the container lines.