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The trends impacting ocean cargo in 2018 and how shippers can navigate these ever-changing challenges in the ocean freight marketplace.
Severe truck driver shortages, the formation of ocean carrier “alliances,” the increased use of virtual forwarding, and trade agreement uncertainty are all impacting ocean cargo shippers right now. From Mexico’s lack of certified truck drivers to the U.S.’ new electronic logging device (ELD) regulations to NAFTA’s current “up in the air” status, the trends are numerous and too important for organizations to ignore.
“The number one topic for shippers right now is the U.S. trucking situation,” says Trond Prestroenning, Executive Vice President, Ocean Freight Americas at DB Schenker. “We’re facing a critical driver shortage in key metropolitan areas throughout the country, and going to extra lengths to try to secure the necessary truck power for our customers.”
For ocean shippers, this situation translates into port and railramp delays on both the import and export side. “These containers need to come off at the port and be put on the road or rails for delivery,” Prestroenning explains. “On the export side, empty containers are going to facilities for loading, which means that the driver shortage is definitely cutting both ways.”
Mexico is facing a similar situation, only there it’s because many of its drivers lack the credentials needed to operate vehicles in the U.S. To fill these gaps, a number of organizations are launching their own driver training programs to attract the younger job candidates and/or existing employees who want to switch to higher-paying careers.
“This isn’t a problem that’s going to be solved overnight,” says Trond Prestroenning Executive Vice President Head of Ocean Freight, Americas. The logistics provider is having in-depth discussions with its trucking partners and helping to figure out new ways to attract younger drivers. In the future, self-driving trucks may help to ease the situation, should the regulatory environment surrounding this emerging technology approve its commercial usage sometime in the next few years.
Ocean Carriers Continue to Join Forces
Carriers are becoming more alike and homogenous—a trend that could lead to fewer choices and higher prices for shippers that use ocean freight. Over the last two years, many of these providers have come together to form these three alliances: 2M Alliance (comprising MSC, Maersk, Hamburg Sud, and Hyundai), Ocean Alliance (CMA CGM, China Shipping, APL, Evergreen, COSCO, and OOCL), and The Alliance (NYK Group, “K” Line, UASC, MOL, Yang Ming, and Hapag-Lloyd).
By effectively shrinking the number of carrier choices, as well as the product/service offerings associated with those carrier choices, these alliances are creating a largely homogenous ocean carrier industry. “There really are no big differentiators anymore across the bigger carriers,” says Prestroenning. “Even within the alliances themselves, we’re seeing a ‘blending’ of large and small carrier options that are starting to look and feel very much alike.”
To help shippers navigate this new environment, DB Schenker is helping to alleviate these pain points by negotiating on rates on a carrier-by-carrier basis, and based on the specific ports, vessels, sharing space, and infrastructure opportunities that each offers. “The alliances may be working together more closely,” says Agustin Lopez, VP, Ocean Business Development, Americas for Schenker, Inc., “but as an NVO, we’re able to create some synergies for our customers and deal one-on-one with these individual carriers to secure the best opportunities.”
Virtual Forwarding Takes Hold
Like most corners of the business world, technology is playing an increasingly important role in the ocean supply chain right now. Of particular interest to shippers is the use of “virtual forwarding” or, platform-based forwarding that provides high levels of visibility, integrated booking and billing capabilities, and key performance indicators (KPIs) that shippers can use to work smarter and faster.
“Our customers are eager and curious about virtual forwarding; there’s a lot of talk about it right now,” says Prestroenning. Driven in part by the growing demand for Amazon-like shipment visibility in a world where carriers sometimes struggle to provide port-to-port transit time windows, the virtual forwarding trend is sure to grow over the next 6-12 months.
“We’re putting resources, effort, and investment into bridging those visibility gaps for customers, and looking into the role that virtual forwarding is going to play in that realm,” says Prestroenning, who adds that logistics will remain a “people business,” despite the additions of new technology, devices, and software.
“That’s where the big difference is between DB Schenker (as a large, 70,000-employee company) and a virtual platform provider,” says Prestroenning. “However, we can also fill each other’s gaps by teaming up and offering high-tech solutions to our shipper-customers.”
What’s Coming Around the Next Corner?
The U.S.’s withdrawal from the Iran nuclear deal, the possibility of a higher VAT tax, tighter alliances among ocean carriers, and the potential for strong retail growth over the summer could all impact ocean availability and rates for the remainder of the year. “Rates may fluctuate, but there are some variables in play right now that prevent us from making those predictions,” says Lopez. “A lot of customers are telling us that their forecasts are strong for the remainder of 2018, but we’ll really just have to wait and see.”
Prestroenning’s recommendation to shippers facing today’s trends is to, “plan ahead your supply chain when it comes to scheduling, avoid as much as possible using containers as ‘storage’ as free time availability is shortened dramatically, and ‘treat your provider well’ – in short, partner-up rather than entering a traditional vendor/shipper relationship. With close partnership comes increased flexibility and the ability to perform well in a challenging market.”