Navigating the waters of international shipping can be quite complex. While working through a 3PL may reduce complexities in the decision-making process, shippers should still have an understanding of how their freight moves overseas.
By educating themselves on ocean carrier options and staying up to date on performance and operations, shippers can ensure they’re using the best carrier to suit their needs.
The Right Line at the Right Speed for the Right Cost
With dozens of ocean carrier lines plying multiple shipping lanes, the choices can seem abundant. Yuriy Ostapyak, director of Global Operations at Logistics Plus, says shippers should start by narrowing down their potential routes and equipment required, and by identifying their most important priorities, whether that be time or cost. “Right off the bat, depending on route and time, you can take many carriers out of the equation and narrow your choices down to two or three,” Ostapyak says.
Slower-moving ships typically save on fuel and can offer lower costs, but they come with longer transit times. Ocean carriers usually price by the size of the shipment, by container loads or less than container loads (LCL), which are measured in cubic meters. Shippers should consider if they’re shipping Freight on Board (FOB) or Cost, Insurance and Freight (CIF) and whether they may also face additional charges such as general rate increases and customs fees.
Tony Nuzio, CEO of ICC Logistics, says it helps if shippers are flexible and willing to stagger and break up their shipments. Whereas a segment of cargo that isn’t needed for 45 days can be transported in a slower and less expensive fashion, time-sensitive cargo may best be shipped to a different port then transported overland. “You may want to use a combination of ocean carriers and land bridges to find the best options. It’s key that you never take a one-size-fits all approach,” Nuzio says.
Delays and Operations
In today’s environment, it’s worth considering a company’s financials. While the industry is starting to emerge from some bad years, most ocean carriers are still not profitable. The last Container Forecaster report by Drewry maritime research consultancy found only five in a sample of 13 carriers were producing a profit. Drewry also said there was a wide gap between the best performing and worst performing lines, noting “significant differences between companies in terms of scale, cost, trade coverage, customer base and spot-contract ratios.”
Ostapyak says shippers should be cognizant of any financial problems a carrier could have. Korean-based Hanjin Shipping Co, which was one of the world’s top 10 container lines in terms of capacity, ran into financial troubles in 2016 and at one point left $14 billion worth of cargo stranded at sea. There are constant debt reconciliations and debt restructure deals between some ocean carriers, Ostapyak says.
“From our standpoint, we’ve watched this very closely as we’d hate to have our customers’ containers being stuck, arrested at port, because their line didn’t pay a bill or is having some sort of bankruptcy situation,” he says.
Many 3PLs and 4PLs are consolidating the carriers they use in the market, aiming to develop relationships with a select few rather than juggle a dozen carriers. Currently, three ocean carrier alliances, Ocean Alliance, The Alliance and 2M Alliance, represent the majority of global container trade.
Then there are the alliances formed from within. In June, Wallenius and Wilhelmsen merged with EUKOR Car Carriers and American Roll-on Roll-off Carrier, and now all of them operate as Wallenius Wilhelmsen Logistics ASA. The global logistics player has 130 vessels serving more than 15 trade routes across six continents, with most customers being manufacturers of vehicles, mining and construction equipment and machinery.
Shippers should stay informed of changing conditions, services and how carriers are performing relative to key performance indicators. They should also consider the ports their cargo will move through. Okstapyak says ports such as Shuwaikh, Jebel Ali and other Middle Eastern and Indian ports can tend to be more “unpredictable.” Even in the U.S., labor issues can cause tremendous disruptions, such as when disputes led to shutdowns and backlogs on the West Coast in 2015. “You almost need to have a sixth sense about labor issues at ports,” Nuzio says.
Certain carriers that are “notoriously slow,” and some carriers can outperform on some routes while lagging on others, Ostapyak says. Shippers also have to consider weather, which can add predictable delays in certain locations during certain times of the year. “With autopilot and computers, many of the carriers do give a pretty accurate description of the transit itself, and they have the capabilities of going faster or slower, depending on if they need to make up ground,” Okstapyak says.
Saving Greenbacks by Going Green
Environmental records and sustainable operating practices have become a critical component of transoceanic shipping in the past decade. And there’s often a direct correlation between green practices and monetary performance, Ostapyak says. Newer ships are significantly more efficient, use less fuel and operate with smaller crews. “These issues go hand-in-hand in the way they operate and they have lower operating costs that can translate into lower freight costs,” Ostapyak says.
As a general rule of thumb, larger and more profitable carriers with money to invest in new ships and equipment tend to be more efficient. These ocean carriers are using new ship designs, upgrading propellers and engines to boost fuel economy and using IoT devices and software to more efficiently transfer cargo. They’re also boosting their economies of scale. Mitsui O.S.K. Lines, Ltd. announced in November the delivery of the MOL Truth, a 20,000-TEU containership that will ply the Asia-Northern Europe trade as part of The Alliance. MOL Truth features low-friction hull paint, a high efficiency propeller and PBCF, engine plant and optimized hull space.
Most modern ocean carriers offer a high level of visibility into their location, transit times and forecasts, he says. Ostapyak says big carriers like Maersk and MSC use sophisticated systems that offer live feeds and live updates of ETDs and ETAs. New IoT devices, software and communications equipment now enable shippers to have detailed views of their cargo in real-time. Many ocean carriers are also integrating with industry specific sales and logistics programs. In September, Maersk expanded its use of Salesforce so shippers can integrate global transport and logistics in the entire customer journey and create a seamless experience in the lifecycle.
Shippers should also consider the safety records and insurance coverage of their carriers. One of the major causes of major shipboard fires is non-compliance of restricted commodities and dangerous goods. Hapag Lloyd’s Cargo Patrol Team has been hailed as an innovative risk-reduction and compliance team that identifies roughly 1,250 potential undeclared or misdeclared bookings each day.
Finally, Nuzio says shippers should keep an eye on invoicing. Faced with tightening margins, many carriers have outsourced and offshored their invoicing, something experts say is leading to more inaccuracies. “It’s something to be on the lookout for. We’ve seen instances of double billing,” Nuzio says.