Ocean carriers / container lines hurt liquidity / increase inventory of customers' supply chains.
SUPPLY CHAIN PERFORMANCE EROSION
Supply chains are complex with an evolving landscape of stakeholders and practices. Container lines are important participants that affect supply chains with their operational changes. Today:
--Impact from Actions of Container Lines--
- fewer carriers are in business because of mergers and bankruptcies
- alliances, slot exchanges, and vessel sharing among carriers have been created and changed
- shipping routes are often revised
- sailing schedules are made and reworked; and
- “slow steaming” is an ongoing practice.
SUPPLY CHAINSSome shippers care only about the rates they pay; companies with leading-edge supply chains know differently. Carrier operations have repercussions. The effects are about more than transport; they are about supply chains.
Performance reliability is important for supply chain effectiveness. Firms create weekly buckets of production/build plans and logistics plans. These are dynamic and critical because they often involve high volume items, seasonal goods, or new products. The plans reflect underlying lead times, which include transit times, from suppliers to factories and from factories to customers and distribution centers.
When container lines change operations, there are corresponding changes to underlying transit times in logistics and build plans. Services that are slower, unreliable, and inconsistent, require companies to go into fire-fighting mode to compensate for problematic service. Significant expediting is used-- a sign of process breakdown--and creates de facto chaos. Products may be flown to keep production lines going or to meet sales needs.
Then there are uncertainties with mega-ships. How will they be filled if supply exceeds demand? What will carriers do to ameliorate under-utilized capacity—and will it affect transit times?
Also, what will be the time factors getting mega-ships into and out of ports? If fewer ports opt-in to handle the ships, what does that do costs and to the time from the port to distribution centers or to end-use customers? All these create scenarios of questionable time consistency. How do supply chain organizations deal with such vagaries for build and delivery plans and to effectively manage supply chains?
To deal with varying transit times, more inventories—more safety stock--are added throughout the production supply chains. Additional working capital is tied up in raw materials, work-in-process, and finished goods. This is investment that could be used elsewhere. Such added inventories are an anathema to both supply chain management and lean logistics. The net result is a third group of inventories in the supply chain.