To engage in the business of global trade, picking the right ocean carriers is key to ensuring your goods get to store shelves and customers on time. And cost is just one consideration.
How reliable carriers are in sticking to their published sailing schedules, how clearly they communicate any schedule changes or delays to you, as well the trade lanes and ports used by carriers are also critical things to consider, according to industry watchers.
Large shippers such as Wal-Mart that often have a direct line of contact with carriers have different priorities than smaller shippers reliant on freight forwarders, says Ram Siddarth, vice president at Flexport, a freight forwarder start-up that counts Google Ventures among backers and reportedly has the aspirations to be “Uber of the Oceans.”
Siddarth says large shippers often prefer carriers that help them reduce the time containers spend at ports before vessel sailing (dwell time) to cut costs. For smaller players, communication is a top consideration—they want timely updates and to be informed when there’s a delay, he adds.
“It’s a relationship-based business,” Siddarth says. “Cost is just one concern. Visibility is another.”
Shippers also need to consider the various alliances ocean carriers have formed similar to airline alliances, says Carole Cirino, director of Ocean Product at APL Logistics, a global supply chain and logistics service provider that manages both air and ocean freight forwarding. “The biggest change concerns the array of service combinations that companies have to choose from,” she says.
As more mega-ships than ever hit the water, this adds another thing to consider, according to Cirino. “Many ports don’t have the necessary capacity to handle the mega-vessels,” she says. “This will have an undeniable impact on which carriers companies can use for certain routes.”
The average capacity of a container ship has doubled in the past decade, with the largest container ships now able to carry 19,200 20-foot containers, according to a December report from the intergovernmental organization International Transport Forum at the OECD.
Which ports are used by carriers is another important factor, Cirino says, adding that some ocean terminals, such as those in Southern California, are considering reducing the free grace period they give to companies to pull cargo. The 2014 U.S. West Coast port shutdown wreaked havoc on the U.S. supply chain and is another caution. “Engaging in some degree of port and carrier diversification is always a smart move,” she says.
Thanks to big data and technology, shippers have more resources than ever to help them make decisions. “Shippers have been working with outdated data that’s weeks to months old and incomplete,” says Lionel Louie, chief commercial officer at CargoSmart, a provider of data and cloud-based software that helps shippers and freight forwarders monitor and benchmark carriers’ performances.
“Shippers can now access more up-to-date and complete data. As the industry undergoes a digital transformation, ocean carriers will be required to find new ways to serve their customers, partners, vendors and shareholders.”
Indeed, some carriers aren’t oblivious to the industry change and desire transparency. MOL Liner Ltd., for example, regularly publishes public updates on its various key performance indicators, from on-time arrival performance to how it’s reducing CO2 emissions.