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Insurance important for shipments of export cargo and import cargo in international trade.


When Hanjin Shipping, the world’s seventh-largest container line, collapsed in September of last year, it sent tremors throughout global industry. An estimated $14 billion worth of goods from some 8,300 owners was tied up on the stricken carrier’s vessels, many of which were moored in sight of ports but not allowed to dock and discharge their loads. Shippers were left scrambling to find ways to get their cargo to its destination, in many cases missing vital deadlines.

At the first creditors meeting in a Korean court in early June this year, more than 180 plaintiffs were in attendance, and the claims filed added up to about $10 billion, but many cargo owners did not bother because they had low expectations of recovering any funds.

Hanjin was an eye opener: It highlighted how important it is to have comprehensive coverage,” says Paul Friel, national cargo leader at insurance firm Marsh. The incident showed that shippers should not rely only on the carrier’s liability insurance, he adds.

Shippers have to asses the total cost of risk and determine how much they want to cover. They should also make sure that there is a process in place to take care of their claim fast and efficiently, he advises.

If American companies needed reminding of the need for insurance for their goods, the recent floods in the Gulf should provide ample illustration. Usually losses caused by flood or wind are not covered by the liability insurance of warehouse operators, Friel points out. “Shippers are sometimes surprised by limited liability,” he says.

Many cargo owners look for comprehensive solutions that cover the entire process from beginning to end, observes Dan Negron, vice president of Thomas Miller Americas, the managing agent for the Americas of international insurance firm TT Club.

Most shippers want a solution that covers the entire transit. Door-to-door is almost expected,” confirms Friel.

Door-to-door service is difficult to get in some countries of destination, although overall the situation is getting better, remarks Negron. In such cases it is advisable for the exporter to get the receiver to pick up the goods from a safe location, such as a port, he says.

Shippers may be tempted to vary the extent of cover depending on the risks, especially in the country of destination. Friel counsels against this. “In the course of transit, you don’t know where the damage occurs. It may be dropped by a stevedore in New York,” he says.

Many insurers offer a range of standard policies covering such aspects as liability or errors and omissions. Players like TT Club that specialize in logistics offer seamless cover based on an assessment of the specifics of the logistics provider (such as types of activities, geographical areas, types of goods handled, terms and conditions of service), as well as cargo programs for shippers to complement these.

Increasingly, forwarders have taken to offering insurance policies to their clients, working together with insurance carriers or brokers, notes Friel. “We see this as a large trend in the industry,” he says.

He attributes this to the fact that cargo rates have been driven drown relentlessly, which is pushing logistics firms to expand their service portfolio and come up with comprehensive solutions. Marsh itself is increasingly working with logistics providers that want to add insurance to their service.

Typically, this is shipper’s interest insurance, which covers the shipper’s insured value of the goods against physical damage or loss without the need to prove fault. Carriers can underwrite such a policy giving specific cover for any potential damage.

Such an engagement may accelerate the claims process, as the logistics firm is usually the first to know if something has gone wrong, Friel reflects.

One concern with logistics companies is that they may only cover the parts where they are involved in the logistics. You don’t want to leave any gaps,” he warns.

Shippers should also ensure that both the logistics firm and the insurer understand their industry and are aware of the specific concerns and requirements associated with it, Friel adds.

Negron stresses the importance of written documentation. Without this, shippers may encounter difficulties if a dispute arises. “You can get into a ‘he said, she said’ situation,” he warns.

For shippers who take out insurance through their logistics provider, it is important to look beyond the terms of the coverage. They should examine their total cost of risk and also weigh the logistics expenditure to assess the cost of the total package, Friel advises.

Negron suggests that shippers should do a background check on their logistics provider. By the same token, if a different logistics firm is employed in the country of destination, this company’s credentials should be checked.

He advocates a systematic approach to the insurance issue. “A shipper should follow a checklist,” Negron says.

Friel points to the importance of information flow between different departments at the exporting company. “Make sure there is communication and connectivity, that risk management and insurance departments are well aligned with the logistics department that negotiates rates and space,” he remarks.

For their part, shippers should do more to make sure their cargo is properly packaged and does not pose any risk. According to TT Club, just 5-10 percent of ocean cargo is hazardous, but between one-third and half of all incidents of reported cargo damage on ocean carriers have a cause that involves dangerous goods. In partnership with global liner and shipper organizations, the insurer is promoting cargo integrity, with an international code of practice for packing cargo transport units at the core.

Shippers are unlikely to see any financial pressure from the insurance industry for greater compliance through raised premiums, though. According to Marsh, global insurance rates have declined for 17 consecutive quarters, although the rate of decline has moderated over the past 18 months. For the foreseeable future, the initiative will continue to focus on raising awareness of the issues with shippers and promoting safe packaging standards.

However, the liabilities arising from an incident caused by improperly packaged or misdeclared hazardous materials are potentially far more serious.

Airlines are carrying more pharma shipments of export cargo and import cargo in international trade.


This past May, logistics IT provider Unisys unveiled tracking software for pharmaceutical shipments that combines security, data analytics and compliance technology in a single platform. According to Unisys, this gives life sciences and healthcare firms enhanced visibility of the full global supply chain to help counter theft and counterfeit drugs.

In addition to tracking capability and security features to shield data from external access, the software supports monitoring of ambient conditions–not only temperature but also other environmental factors such as humidity.

Two developments are driving the need for better control of ambient conditions. The rise of personalized medication is raising the bar for logistics providers, given higher value of individual shipments and a greater need for accountability, notes Paul Martins, CEO of MNX Global Logistics, which moves primarily time-critical shipments for the medical sector.

The second factor is the push to serialization, which mandates visibility by serial number to combat counterfeiting. Most major markets–including the United States, the European Union, Brazil and China–have embraced this initiative.

Providers of monitoring technology have responded with a plethora of devices. Almost every day a new tracking app is launched, says one airline manager. For logistics companies, it has become important to ensure their IT platforms can handle a broad array of such apps.

We at DHL Global Forwarding call ourselves technology agnostic,” remarks Frank Cascante, regional head of Development, Temperature Management Solutions and Cold Chain Engineering. “We have SLAs [service level agreements] with over 12 companies that provide these devices.”

Air carriers such as United and American offer a range of services, from passive solutions using thermal blankets to offerings that utilize temperature-controlled containers in combination with top boarding priority and tailored handling processes. They have also invested in staff training and recruited industry experts, not only to devise their products but also to communicate with shippers.

We promote a trilateral approach,” explains Tom Grubb, manager, Specialty Products, Cargo Strategy at American Airlines. “We should work with each other to develop solutions.”

In many industries, the communication for shippers is almost exclusively with the forwarders, which deal with carriers in turn, but the healthcare segment is moving toward a huddle of the three to hone end-to-end solutions.

We’re closer than ever to shippers, in partnership with forwarders,” says Manu Jacobs, global head of Pharma Sales at United Airlines. Tripartite discussions have always taken place, but they have recently advanced to another level, he reports.

Every step in the process is written down in Standard Operating Procedures to ensure transparency between the parties involved, Jacobs adds.

While this provides a solid basis for the partners to work with, Jacobs and Grubb see a need for a universal standard for moving pharmaceuticals and healthcare products by air, ideally on a global basis.

The most promising candidate for this would be the Center of Excellence for Independent Validators in Pharmaceutical Logistics (CEIV), a scheme to audit and certify air cargo providers that has been developed by the International Air Transport Association, a global interest group that represents the vast majority of international airlines. American is in the process of obtaining accreditation for its Dallas/Fort Worth and Miami stations, while United is currently evaluating whether to embrace this for a couple of its U.S. hubs, according to Jacobs.

CEIV is making great strides,” comments Grubb. “It is very well received.”

For airlines, it makes sense to ensure that their major hubs are set up to a high standard of compliance first. The next logical step is to extend the concept to the other end of a major route to establish a solid airport-to-airport solution. Swiss World Cargo, a pioneer in pharmaceuticals transportation, led the way there with the establishment of “pharma corridors.” The first, linking Basel, Switzerland, with Singapore, was set up in 2016. By the end of this year, the Swiss carrier intends to have 100 lanes in place.

Airports are pushing in the same direction. Brussels Airport, which provided the foundation for IATA’s CEIV program, joined hands with Miami International Airport last year to establish a global organization for airports and other stakeholders that have embraced CEIV. This group, which has since swelled to 10 members, aims to share best practices and jointly develop standards. The ultimate objective is “to realize, together with the pharma manufacturers, lane certification for pharma transportation by air, increasing quality and transparency.”

Freighter airline Amerijet, the first U.S. air carrier to obtain CEIV accreditation, plans to mount twice-weekly flights between the two founder airports in the second quarter of next year, which will be its first foray into the transatlantic arena.

The fact Amerijet as a CEIV airline will link both our hubs with a full cargo aircraft is a next step in offering customers an end-to-end solution for pharmaceuticals,” says Steven Polmans, head of Cargo and Logistics at Brussels Airport.

The cargo divisions of Delta and Virgin Atlantic airlines opened a new Pharma Zone at their joint facility at London Heathrow Airport on Oct. 2, billing it as the first UK-U.S. joint venture cargo offering in the world’s biggest trade lane for pharmaceutical products.

This dedicated Pharma facility at London Heathrow is an important addition to our global pharma network and, most importantly, provides our customers and pharmaceutical manufacturers access to another major international gateway,” says Shawn Cole, Delta Cargo’s vice president. “Delta Cargo has successfully achieved CEIV certification in Atlanta and for Delta’s headquarters. Over the next year we aim to add our other key hubs to the network, starting with New York-JFK and Los Angeles. This network, combined with the promise of speed, consistency and efficiency in delivering high-value, time-sensitive, temperature-controlled products right across the network really is a first for the Delta Cargo and Virgin Atlantic Cargo joint venture.”

Airports and airlines have compelling reasons to raise their game for healthcare traffic. Not only has this segment shown strong growth–coupled with good margins thanks to the need for temperature control and other value-added elements–but there is also concern that shippers may shift more of their traffic to ocean carriers. Already some pharmaceutical cargo has been switched over to waterborne transportation.

Because of the lower cost, we have seen a migration of some of these volumes to other modes,” confirms Grubb.

Some logistics providers see an opportunity there. Last year, DHL Global Forwarding adapted its ThermoNet product originally designed for air transport of pharmaceuticals to ocean transport. The revamped offering allows round-the-clock monitoring and intervention based on the company’s SmartSensor technology, with data being transferred in real time via the GSM network.

This has been a huge breakthrough for our customers,” says Cascante. “Most of the large companies try to transfer cargo from air to ocean where they can.”

For air carriers, another question is the rise of online orders of medication and what Amazon is going to do in this sector. Its orders for 40 Boeing 767 freighter aircraft at the end of last year caused a stir, although Amazon management has denied any intention of targeting the logistics sector, arguing that it simply needs those planes to supplement insufficient commercial lift. Should it decide to order small freighters for regional sectors, alarm bells would ring at commercial air carriers.

Reefer containers are carrying more shipments of export cargo and import cargo in international trade.


Logistics firm DHL Global Forwarding put GSM-based 24/7 monitoring capability for temperature-sensitive shipments for the life sciences and healthcare industry on the water last year when it launched DHL Ocean Thermonet, a product designed for this sector that allows tracking and intervention around the clock using the company’s SmartSensor technology. Ambient temperature readings are automatically uploaded in real time via the GSM network to the company’s LifeTrack platform upon completion of key logistical events or detection of potential irregularities.

During the ocean voyage the sensors log data and transmit them once the vessels get in range of cellular signals. However, some shipping lines have real time tracking capability, notes Frank Cascante, regional head of Development, Temperature Management Solutions and Cold Chain Engineering, adding that DHL has service level agreements with the top carriers based on Good Distribution Practice, the standard guidelines for the distribution of medicinal products for human use.

Ocean Thermonet has been a huge breakthrough for our customers,” says Cascante, noting that there has been strong interest in the market, as this offers shippers a way to maintain quality at lower costs than shipping by air.

In light of the cost differential with airfreight, shippers in the healthcare and pharmaceutical industry have been looking to shift more of their traffic to water. According to one estimate, this mode was set to advance from around 5 percent of global healthcare and life sciences volume moved in 2013 to 25 percent last year.

Chris Connell, president of perishables logistics specialist Commodity Forwarders Inc. in Los Angeles, says that the ocean carriers have taken great strides to develop cold chain solutions. For shippers of fresh produce, this has been particularly interesting, as the margins in this sector make it harder to absorb the high costs of airfreight, he adds.

Technology has certainly advanced a long way beyond monitoring temperature levels, extending to aspects like humidity or levels of oxygen and carbon dioxide. Purfresh, a provider of intelligent perishable supply chain management and control solutions, claims to be the first to have added monitoring and control of ozone levels into the equation for ocean-going reefer containers. The company offers one system for controlled atmosphere monitoring including ozone and another purely for ozone levels. Both offer real-time monitoring during the journey.

According to Purfresh, some types of produce–such as bell peppers, garlic, table grapes, pineapples and potatoes–have little or no benefit from controlled atmosphere but their shelf life can be extended significantly through control of ozone levels, which limits mold and bacteria growth.

Christian DeBlasio, president and general manager of Purfresh, says that most organic produce is shipped by air to overseas markets, but some companies decide not to offer organic produce overseas because of the higher cost of airfreight.

One of Purfresh’s customers, which ships about 100 40-foot containers of organic table grapes from South Africa to Europe every year, uses ozone generators both in its cold storage warehouses at origin and on the sea.

Besides control of ambient conditions, visibility is the second major strand of development, with the emphasis going to real-time updates, as DHL is doing with its Ocean Thermonet product. In 2016, the same year when this hit the market, Purfresh introduced, a third-party web interface for two-way communication with data controllers for reefer containers.

Another critical component is the infrastructure on land at either end of the journey. DHL slots its Thermonet traffic through a network of designated stations. Including airfreight facilities, which is where the Thermonet concept was first rolled out, this now comprises more than 110 locations.

Ocean carriers have been busy building up their cold-chain capabilities. Shipping line OOCL, for example, offers a range of reefer solutions such as ultra-low temperature reefers for temperatures as low as -35 degrees Celsius, fresh air management technology which controls the mix of oxygen and carbon dioxide, and reefers with dehumidification systems. In addition to the full container service, there is also a less-than-containerload offering in the carrier’s portfolio.

OOCL’s cold chain services don’t end at the port. Through its Cold Chain Logistics arm it offers end-to-end service including cold storage warehousing, customs clearance, reefer trucking, local distribution and direct store delivery.

New services keep coming on stream. In July Maersk started the commercial roll-out of its Remote Container Management system, which gives access to information about a reefer’s location, temperature and atmospheric conditions from anywhere in the world.

French shipping line CMA CGM recently announced a partnership with Seatrade, a specialized reefer shipping operator, to launch a weekly service from French Polynesia and Australasia to the U.S. East Coast and Europe starting in October with a string of 13 vessels. According to the pair, this is going to be the first direct weekly service between French Polynesia, northern Europe and the East Coast.

This trend is likely to continue, given bullish growth projections for international shipping of fresh food as well as pharmaceutical and life sciences traffic. Moreover, increasingly stringent regulations, such as serialization (which requires traceability of pharmaceuticals at the piece level), keep raising the bar for shippers as well as their logistics providers.

To some extent, logistics providers are hamstrung by financial constraints, Commodity Forwarders’ Connell points out. Reefer rates have markedly dropped over the past three years, which makes it harder for carriers to invest in new technology and services. On top of this, there are external factors such as the strength of the dollar and global political instability that affect long-term planning and investment, Connell notes.

Another question is how recent shifts on the ocean carrier side are going to affect supply chains and transit times. For one thing, the deployment of ultra large container vessels (ULCVs) has brought challenges to port operators that find themselves overwhelmed by the large volumes of containers brought in by such behemoths. For shippers of perishables, the scenario of their cargo getting stuck at a port threatens to ruin gains in shelf life from the use of better cold chain technology.

We have definitely seen at certain ports large spikes. Bottlenecks at ocean ports is a larger concern than one, two years ago,” remarks Connell.

He does not see a ready solution for this. “You don’t change the physical infrastructure of a port,” Connell says. “You can’t quickly build access roads.”

Rail moves shipments of export cargo and import cargo in international trade to and from ocean ports.


In June, the Port of Toledo announced that it had reeled in a big fish. Cliffs Natural Resources, a large mining and natural resources firm, is locating its first hot briquetted iron production plant at the port’s Ironville terminal. The $700 million investment will occupy a vacant 100-acre site that the port acquired in 2008 and equipped with a cargo warehouse, some road infrastructure and a direct-rail spur with a loop of some 20,000 feet in length to allow full unit trains at the terminal.

Joe Cappel, director of Cargo Development at the Toledo-Lucas County Port Authority, reckons that the rail infrastructure to the dock was vital in Cliffs’ decision to locate its new plant at the port. “I think the on-dock rail is a really important part of the project,” he says, adding that the new tenant will build more rail infrastructure at the site as well as laydown area for cargo and other infrastructure.

From coast to coast ports are investing in on-dock rail facilities. The Port of Los Angeles recently completed a $71 million intermodal container transfer facility at its TraPac terminal, which includes a semi-automated on-dock rail yard. Next door, the Port of Long Beach unveiled a draft environmental study last December for an on-dock rail facility at one of its container terminals. The port authority wants to redevelop the existing rail yard to accommodate longer trains on the site. The plan calls for a set-up that will be served purely by rail, with no access for trucks. According to the port authority, the project will enhance the port’s efficiency and is vital in its push to modernize it and lead the way in environmental sustainability.

Over the longer term Long Beach intends to spend as much as $1 billion on rail facilities, and much of this investment will go to on-dock rail. The percentage of containers shifted directly between vessels and trains at the port is set to increase from currently 26 percent of container throughput to 35 percent in 2020 and climb to 50 percent later on. The Port of Los Angeles aims to boost its share of on-dock transfers between rail and vessels from 26 percent in 2015 to 40 percent.

On the East Coast, the port of Virginia has embarked on a $320 million expansion project that will boost container capacity by 40 percent and double on-dock rail volume. Up the coast, the port authority of New York & New Jersey is spending $149 million to set up an intermodal transfer facility at its Bayonne container terminal, the only container facility in the port that currently does not have on-dock rail.

As much as two-thirds of the containerized cargo that passes through the West Coast ports is intermodal, so on-dock rail facilities can make a significant difference in speeding freight through these ports. Patrick Burgoyne, head of Ceres and Yusen terminals in North America, recently referred to on-dock rail as a recipe to tackle port congestion. “You can quickly move inbound cargo off the docks to make room,” he says. “It helps with congestion and storage issues.”

However, on-dock rail on its own is no guarantee for less congestion, notes Albert Saphir, president of ABS Consulting, a Florida-based shipping consulting firm. “It depends,” he says, “on the layout of the terminal.”

“Newer ports often have a more efficient setup,” remarks Bob Imbriani, executive vice president, International at forwarder Team Worldwide. On-dock rail eliminates an extra handling step and reduces transit time, he adds, which can result in delivery one or even two days faster.

Theoretically on-dock transfers should also reduce costs, but shippers and importers should always look at the total transportation cost, Imbriani advises. “A port with a railhead is not necessarily cheaper.”

The price element is opaque, as shippers and importers are seldom billed for terminal transfer charges per se. Often ocean carriers make their own arrangements for the rail portion and offer their customer a packaged service with one all-inclusive price, Saphir points out.

Still, on-dock rail usually is an advantage. “There is no question if a port has good rail service on dock, that’s a good thing to everyone,” says Imbriani, adding that his company has had positive experiences with the concept.

On the flip side, shippers have little ability to choose and control this element. As the rail companies rarely work directly with shippers and forwarders, the ties are between railroad and shipping line, and they control the process, Imbriani says.

“From a shipper perspective it is close to invisible,” agrees Saphir. “The shipper, and even the forwarder, usually has no influence.”

As such, on-dock rail is not a major factor in shippers’ and forwarders’ decisions on routings, notes Imbriani. “It goes back to carrier routings and transit times. If all is equal, we would prefer on-dock rail, but it’s not a decisive factor.”

For the most part, ports emphasize on-dock rail in their efforts to draw in shipping lines, Imbriani finds. If successful, it brings benefits to shippers as a port’s network of destinations is more important than on-dock rail, he says. He points to the Port of Mobile, where on-dock rail is very efficient in handling cargo, but it does not have a lot of container vessels coming in.

Connectivity is also a more important factor on the land side. “Maybe a port has good on-dock rail but the rail company does not have the connections to various points around the country,” Imbriani says.

This aspect could be of big interest for the ports in the Gulf region as more vessels move through the Panama Canal, he reckons. The ports on the East and West coasts have excellent connectivity, but transit times are fairly long. If a Gulf port has good access to markets in the interior, this could be a significant benefit, he reflects.

When propagating on-dock rail, ports are wont to emphasize the green credentials, pointing out how many trucks a single train can replace. For Cappel, this misses the point. “Some people look at rail as a competing mode to ships and trucks. We don’t view it that way. I think you can’t have enough rail at your terminals. It gives customers more options,” he comments.

For the Port of Toledo, the Great Lakes-St. Lawrence Seaway complex closes between Christmas and March, but the port remains open throughout the year. During those winter months it is rail and trucks that keep Toledo’s traffic going.


Days before the height of the seasonal shopping frenzy, UPS announced a strategic alliance with reverse logistics specialist Optoro to handle an expected flood of returns totaling more than 1.3 million packages on National Returns Day (Jan. 5) and another 5.8 million more over the first full week of 2017. If you’re wondering if you’re handling returns well in house, consider that even the experts see opportunities to bolster their reverse logistics abilities.

With the massive volume of holiday returns looming, efficiency is paramount. By using comprehensive data analytics and multi-channel online marketing, Optoro’s software platform determined the best path for each item, maximized recovery and reduced environmental waste. It also leveraged a number of digital platforms including Amazon and eBay to sell returned items.

U.S. companies that ship their goods to international markets do not face such an avalanche of returns, but they ignore reverse logistics at their peril. By some estimates, this element can gobble up as much as 10 percent of a company’s supply chain costs.

“Some retailers price in a 5 percent return ratio. In fashion it may be 50 percent,” says Brian Bourke, vice president of Marketing at SEKO Logistics.

Jerry Levy, director of marketing and communications at logistics provider OIA Global, stresses that reverse logistics is not a necessary evil. For logistics firms it is another profit center, for logistics firms and their clients it is another opportunity to stand out, he says.

“Before offering reverse logistics to their end customers, shippers should establish very clearly what constitutes an acceptable return, and what are the conditions and timelines to the market,” advises Anabella Mas, head of Integrated Warehousing Services at DHL Global Forwarding, Americas. “Also, they should receive a detailed quote from their logistics provider of choice, making sure it covers all possible instances. They should make sure that their pricing to market covers the costs of the reverse process in full.”

 In many cases reverse logistics is part of the overall logistics package. “We offer reverse logistics in every business,” Levy says. “Some companies put it in their RFP. We put it in because we know they are going to need it.”

At SEKO returns are usually part of the broader deal, but some clients engage different logistics providers for inbound and outbound flows. According to a white paper produced by supplychain247, few companies integrate reverse logistics fully into their enterprise software solutions and many shippers manage returns through disjointed and fragmented systems.

Product recalls are often bolts out of the blue for logistics providers. An online poll conducted last year by Deloitte found that a mere 8 percent of auto manufacturers were using advanced predictive analytics to help prevent, prepare for and manage recalls, and 23 percent had no operational product safety and recall anticipatory analytic capabilities.

Mas observes that reverse logistics are determined by a company’s strategy to market. Some industries—notably electronics, apparel, pharmaceuticals and consumer goods—are frequent users, she adds.

“Our reverse logistics programs are almost entirely for clients from the apparel, retail and outdoor sectors,” remarks Levy.

Cost has traditionally been the overriding factor in the choice and creation of reverse programs. However, this has been changing, as the customer experience and ease of handling returns have become more important factors for many companies, Levy says. “Speed has gotten big. In the past the metric was only cost,” he adds.

 Levy finds that some sectors are most concerned about speed of returns, while others emphasize reliability. Companies that sell high-end goods usually rate quality of service the highest. “Getting it right is their main concern,” he says, adding that in the fashion and technology sectors, there is a stronger sense of urgency of moving returns quickly, as products become obsolete sooner.

The longer a returned item sits in a warehouse or on a truck, the less value its producer or vendor can recuperate, according to Ryan Kelly, senior vice president at Genco, a FedEx company that focuses largely on return flows. He advises shippers to embrace a data-driven approach, which should start with standardizing processes and establishing baseline key performance indicators for these.

“The metrics to control both outbound flows and reverse logistics are very similar in composition,” Mas comments, “but the reverse goods flow is much slower since the points of origin and conditions of the merchandise vary significantly, adding complexities to the process.

“As with any other logistics process, standard operating procedures are required to ensure reverse logistics operations are performed in a professional and consistent way. Specific SOP details will depend on what type of service the customer wants performed,” she adds.

Levy says that SOPs and processes can differ markedly between some commodities. “We build a customized SOP for each of our customers,” he says.

 When it comes to measuring performance, Levy finds that the biggest factor is the timely transmission of status messages to the client’s enterprise resource planning system. “It is critical how quickly we can get the information to them so they can tell their customers how long it will take to get the new product to them,” he says.

 Logistics providers identify the customs clearance process as the most complex aspect of returns when it comes to international business. However, returns seldom go back all the way to the point of origin, Levy notes. “The last thing you want is to trigger transportation cost all the way back, plus the documentation you have with international moves. And it would take a lot of time,” he says.

 More likely the goods will go to a regional distribution center where they are assessed if they can be re-packaged, repaired or disposed. “The first decision is: Can we repackage, reconfigure? Is there any damage?” Levy says.

 This is where the capabilities of a logistics firm to offer services beyond warehousing and transportation come into play. Besides the initial assessment of the state of retuned product, many providers handle repackaging, re-kitting and cleaning. Some go as far as performing repairs. Last year DHL clinched a five-year contract with Getac Technologies, a Taiwan-based manufacturer of rugged notebooks, tablets and handheld computers that usually operate under harsh conditions. The deal calls for the logistics firm to move defective items within Europe to and from a repair facility that it operates at Brussels Airport. Technicians in the facility’s dedicated repair wing perform between 200 and 300 repairs in a month.

Levy says OIA Global keeps “part banks” for clients in some of its facilities—a small supply of parts to replace faulty ones and carry out basic repairs.

Disposal of products that cannot be used anymore is a feature on many reverse logistics contracts, too. This can open doors to closer alignment between logistics providers and clients on environmental issues.

 XPO Logistics manages the flows of British supermarket chain ASDA Stores to and from nine service centers, tracking assets, managing hundreds of supplier accounts for the retailer, and mending some returnable equipment. This contract extends to environmental aspects. XPO has developed and implemented a “zero waste to landfill” program to help the retailer meet its environmental sustainability goals. When the agreement was renewed last year, ASDA identified the environmental aspect as a major factor why it decided to continue to collaboration with XPO. n


In mid-September, Schneider National announced that it had obtained the green light for streamlined Customs clearance for select commodities moving to Mexico at Kansas City Southern Railway’s intermodal terminal in Toluca, some 40 miles from Mexico City. This moved the inspection for peat moss, soybean flour, pet food and cream substitutes from the border to the inland location under a pilot program with Mexico’s food and drug administration. Upon completion of the program, Schneider expects other commodities to be added to the list.

“This seamless border crossing saves time and is a more cost-effective alternative since there are fewer handoffs during the move,” declares Bernardo Rodarte, Schneider’s vice president, Mexico division.

Paul Smith, president of XPO Logistics Intermodal, reports that intermodal traffic heading south across the border is on the rise.

“Intermodal is stronger than ever into Mexico,” Smith notes. “One significant driver is the expanding production capacity with auto manufacturers. We’re also seeing volume increases related to other types of hard goods, such as appliances, electronics and footwear.”

Compared to Mexico, U.S.-Canada flows have been more muted, Smith adds. Still, operators have ramped up intermodal capabilities in this trade lane. CSX Transportation implemented a door-to-door service from Atlanta to Valleyfield in Quebec this year that includes on-site customs inspection and expedited border clearance. Schneider introduced intermodal service between the Southeast and Montreal on a route that bypasses the Great Lakes states.

“We saw a desire for capacity, especially for our customers in Montreal who would ship containers northeast via intermodal to fill in tough service lanes,” said Jim Filter, Schneider senior vice president of Intermodal at the launch of the service. “This additional lane opens up possibilities for current and new customers to ship product quickly and more efficiently to the Southeast instead of by truck and trailer.”

According to Smith, the more rapid expansion of intermodal options into Mexico has benefited from a shift in production as well as increased investment from both U.S. and Mexican rail operators.

 “The two primary drivers are interrelated: rail infrastructure investments and near-shoring,” he says. “Near-shoring continues to be the No. 1 tailwind for crossborder intermodal. A number of manufacturers that had been Asia-based are shifting production to Mexico to cut labor and transportation costs, shorten cycle times, reduce inventory in the pipeline and move production closer to end-customers. Mexico’s two rail operators have responded to this opportunity by upgrading interior lines, expanding intermodal yards and increasing capacity.”

 U.S. rail companies have opened a host of new intermodal routes over the past two years. CSX underscored its stronger focus on the sector when it rebranded its national door-to-door service and established a service recovery team to ensure loads arrive on time. According to Dean Piacente, vice president of Intermodal, this was an industry first.

 Moreover, multimillion-dollar investments in network and infrastructure upgrades from the railroads have elevated their service levels and reduced transit times. At the same time, question marks over the trucking industry—from driver shortage (particularly hitting the long-haul sector) to the impact of new legislation mandating data logging—have added to the appeal of intermodal solutions.

 A white paper published this past summer by intermodal service provider J.B. Hunt also highlights substantial service improvements from rail investments as a big driver for the rising appeal of intermodal solutions.

 “Coupled with scalable capacity and predictable schedules, intermodal’s overall cost effectiveness makes it a must-have for shippers managing supply-chain efficiencies and costs,” said Terrence Matthews, executive vice president and president of J.B. Hunt’s Intermodal division, at the time the white paper was released.

 J.B. Hunt invested $534 million in 2015 net capital expenditures for trucks and trailing equipment and budgeted to invest another $468 million in 2016.

 “Intermodal can make sense for just about any product where you have at least a full container-worth of dry or non-perishable goods,” Smith says.

 “For a shipper, typical considerations are transit time and the reliability of other supply-chain relationships. For example, it helps if the shipper has suppliers at the ready to meet ship windows. Other factors are the flexibility or rigidity of the supply chain, the timing and profile of capacity needs and the ability to forecast production flows. All of these factors come into play in an intermodal purchase decision.”

 Smith lists cost efficiency, security and the Customs clearance process as the three key advantages of intermodal solutions.

 “While intermodal tends to be somewhat slower than trucking, it’s generally more economical, even with the drop in fuel prices,” he explains. “It’s also better for the environment. From a security standpoint, intermodal boxes stacked on a container car are very difficult to breach. The containers can clear customs once inside Mexico, which avoids congestion at the border.”

 While transit times have improved, they are slower than direct trucking services. One industry executive says focusing on speed misses the point, arguing that schedule information and integrity matter far more.

 Smith points out that the imbalance in import and export flows are a challenge for intermodal operators, both in terms of empty miles and positioning containers where they are in demand.

“The city of Guadalajara is a good example of the challenges that stem from trade-flow imbalances,” he says. “Guadalajara has more outbound freight than inbound, so pricing is stronger outbound. When capacity gets tight, some shippers are willing to pay to reposition equipment to service outbound loading cities like Guadalajara. Having balanced equipment flows in the interior of Mexico is as important as having capacity at the border.”

For all the improvements that intermodal networks and the infrastructure that supports them have seen in recent years, there are still performance issues. Shippers have complained about bottlenecks (especially around Chicago), about slow unloading of trains and interchanges that can take as many as four days to complete. In many cases dwell times of intermodal shipments at major interchange points have still been too long for comfort, and rising volumes threaten to aggravate this problem, shippers have warned.

Problems lurk at the border, too.

“For crossborder shipping, it’s important to use an experienced carrier that has strong relationships with brokers at the border,” says Smith.

“Even more important, consider your entire supply chain when evaluating intermodal. “Ideally, you want to ship with a multi-modal provider that offers more than just intermodal.”

For instance, to expedite the flow of parts into Mexico and avoid a plant shutdown, a company like XPO can divert shipments from rail or truck to air transport, he notes. 




72.2% | Yes

27.8% | No



“Start by looking at the financial statistics like revenue, long-term debt levels and working capital levels. Second, pay attention to industry updates and announcements related to charter payment vessels and payments to key vendors by an ocean carrier. Last, and most important, understand the alliances for the carrier. Although you may have booked your cargo with a financially solvent carrier, your container may actually be moving on a less stable carrier through the vessel sharing agreement.” – Derek J. Leathers, President and CEO, Werner Enterprises


“They are not overblown. The future creates the present and shippers always must be on top of what the next advancement might be.” – Scott Weiss, VP of Business Development, Port Logistics Group


“Yes, by minimizing delivery times at reduced costs.” – Allan J. Miner, President, CT Logistics



It was the classic shipper’s nightmare of an overseas shipment gone wrong. Albert Saphir, president of logistics consulting and training firm ABS Consulting, recalls the case of a client a few years ago whose shipment to India ended up in the wrong airport. A clerk at the forwarder that was managing the transportation had entered the wrong three-letter airport code, sending the cargo to an entry point a few hundred miles away from its destination.

To salvage the situation the forwarder tried to arrange a transfer to the right gateway but found himself up against arcane customs regulations that rendered this solution virtually impossible. To make a transfer, a $1 million bond was required—for a shipment worth about $50,000.

In the end, the cargo was sent back to its origin and flown out from there to the proper destination.

Notwithstanding this episode, Saphir sees no cause for headache in flying cargo to Asia. “I don’t see any unique challenges shipping goods by air to Asia as opposed to other export markets. To most destinations in Asia it’s as easy as to Europe,” he comments.

Some aspects have to be checked, though, starting with requirements for special documentation in some markets, Saphir notes. Rich Zablocki, vice-president, Global Product Development, North America at CEVA Logistics, advises that it is important to be aware of holidays in the destination country and their effects on cargo flows. During “Golden Week” in October, for example, shipments face delays in processing at airports in China. Such hiccups can lead to expensive storage charges or, worse, cause problems with timelines for letters of credit, he warns.

Seasonal traffic patterns are another element to be mindful of, remarks Saphir. “You have to look at your own seasonality. Are you expecting peaks and valleys? Then you have to overlay your seasonality with the market. For example, during the cherry season out of the U.S. Northwest, carriers bump regular freight to load up with cherries going to Asia. You may need some contractual commitment from the airline to get your cargo moved during such a peak. There may be a surcharge to pay,” he says.

For the most part, companies that have ad hoc shipments headed to Asia are not facing any serious issues finding a lift. If they have not shipped by air before, they may face delays associated with security regulations for cargo moving on passenger aircraft, but there is ample freighter capacity available across the Pacific, where this does not apply.

“With the trade imbalance there is plenty of space available for any shipper who has cargo. Shipping ad hoc to Asia is not an issue, known shipper or not,” Saphir says.

In cases where a delay in production has caused the shipment to miss the deadline for ocean transportation, there should be more than enough time to truck the cargo to a freighter gateway (usually one of the larger international airports), if there are problems getting a flight at the airport near the factory, he adds.

Zablocki remarks that some Asian airlines have recently cut freighter flights at short notice to reduce overcapacity and improve their load factors. This can cause some inconvenience, he says.

With airlines vying to fill their cargo holds on the way to Asia, there are many routings possible. Typically a forwarder would pick two or three options for a shipper to choose, Saphir says, adding that the importer on the Asian end would usually determine the airport to which the goods should be flown.

Larger shippers tend to look at door-to-door arrangements, Zablocki says, whereas smaller exporters usually get involved only as far as arranging the movement of the freight to the airport on the other side of the Pacific, where the logistics provider of their customer takes over.

“I would not touch customs clearance or delivery. That gets complicated,” comments Saphir.

The approach is different if the shipper is looking to establish a pipeline to Asia for regular traffic by air. This scenario is not limited to large shippers. “We have lots of mid-sized to smaller companies that are shipping very nicely to Asia,” says Zablocki.

For such clients much hinges on the question of whether or not they need a distribution center in Asia and where this should be located. This is where logistics providers should be—and usually are—involved, remarks Zablocki.

“It depends on the size, complexity and sophistication of the client if they require help determining the number and location of distribution centers,” he says.

He points out that the decision process can be quite time consuming. A large European retail customer of CEVA spent about 12 months working out where to set up a distribution center and how to feed it for a planned expansion into the U.S. market, he reports.

Asian locations such as Hong Kong and Singapore are often chosen for such a role, given the ease of doing business and the ready availability of ample flight options. “These places offer lots of opportunities to ship bulk out and then distribute,” says Saphir.

Having a distribution hub in China can be challenging, he adds. On the other hand, foreign trade zones can play an important role in a company’s Asian distribution strategy. “An FTZ can make a huge difference for them,” confirms Zablocki.

Another factor to consider is the frequency of air service to Asian entry points. Some cities in northeastern China have started manufacturing, but from a transportation perspective they are still way behind locations in southern China, Zablocki says. “There can be significant delays due to the need for trucking to the nearest port with good airlift capacity.”

This can be cumbersome and risk additional delays and other hiccups. Hence many shippers have a clear idea about direct air links. “Our U.S. clients look for service to accomplish a minimum three-day transit,” he says.

Saphir favors a stable routing over an ongoing push to find lower rates for regular traffic to an Asia destination.

“If you have continuous flow of goods to Asia—say, twice a week—make sure you use the same airline and route,” he says. “You want consistency. You don’t want to change carrier or routing every time.” 



38.7% | Expanding into additional markets

37.7% | Increasing sales in current markets

1.9% | Establish supply-chain space in foreign markets

19.8% | Improving my global logistics strategy

1.9% | Improving my supply chain financing



“Tools to automate processes and data driven cost saving initiatives. Features should include procurement, planning and optimization, execution, freight audit and bill pay, reporting and analytics.” – Derek J. Leathers, President and CEO, Werner Enterprises


“The impact of driver-less trucks and drones on insurance costs for OS&D [over, short and damaged claims].”

– Allan J. Miner, President, CT Logistics


“Very far. [They] will eliminate the issue of driver shortages and all other HR challenges.” – Scott Weiss, VP of Business Development, Port Logistics Group


Albert Saphir, principal of ABS Consulting, was contacted not long ago to help with an international sourcing effort that could serve as an illustration on how not to do it. A company based in Jacksonville had found a Chinese manufacturer via Alibaba, the Chinese e-commerce platform, and ordered a container load of goods which it paid for with a credit card.

“They had not seen the factory, they had not seen any samples, and they had never heard of U.S. import regulations,” recalls Saphir. He referred the firm to a freight forwarder to take care of the logistics.

Usually companies that look for suppliers overseas pursue a more educated strategy and start the process with a better understanding of logistics requirements. Still, supply chain issues are often an afterthought, as the decision to source in another country is usually driven by labor costs, taxes and operating costs. Some supply chains are so arcane that cost savings are highly improbable, Saphir notes.

 The objective should be to simplify the supply chain, says Jerry Levy, director of Marketing at forwarder OIA Global. By extension, a logistics provider should make it easy for both his clients’ suppliers and customers, he adds. Initial arrangements should allow a flexible market entry and exit, in case the supplier does not meet expectations, Levy advises, adding that most supply chains fail during the implementation phase. To withdraw with little cost and obligation, fixed costs should be kept to a minimum.

Supply chain arrangements have to extend beyond the regular flow of products to include spare parts, which often require different logistical solutions, remarks Brian Bourke, vice president of Marketing at SEKO Logistics. “How can you make sure your supplies can move fast when you’re in a bind?” he asks.

Contingency plans are vital parts of a supply chain, both for importers and logistics providers. Levy points to the near paralysis at West Coast ports in the early part of 2015. “Was your cargo stuck in a port or moving over an alternative gateway?” he asks.

 Contingency plans are in place at SEKO. The company was able to move cargo to and from Europe when the eruption of an Icelandic volcano in 2010 shut down much of Europe’s air space, Bourke recalls. By the same token, importers need to make arrangements in preparation for catastrophic events like the tsunami that hit Japan in 2011. “Manufacturers that had key elements of their supply chains tied to one geography were subject to disruption,” he says.

 Importers also have to make sure they are on top of security and liability issues. “Liability is often an afterthought,” Bourke warns, adding that some companies give prospective suppliers a seven-page questionnaire on C-TPAT compliance while others’ are 200-300 pages.

 Overseas suppliers may well have significantly better leverage over transportation pricing thanks to higher volumes, so it sometimes makes sense to take advantage of that, although it implies relinquishing control over logistics. Some U.S. companies insist on using their own logistics provider at source locations, assuming those companies have a presence there. In some countries legislation mandates that local providers are used for various functions, Saphir points out. For example, Saudi Arabia allows only local companies to perform customs clearance, he says.

 When a supplier’s logistics provider is used, it is advisable that the importer familiarize himself with that company. “If you’re out in Jakarta seeing a manufacturer, you may as well see their forwarders,” Saphir says.

It is imperative that the logistics firms used are on the same page and can communicate without problems. Levy warns that if the supplier’s forwarder refuses to talk with the buyer’s, that’s a red flag. If the supplier handles the logistics, these elements should be clearly itemized on invoices, he stresses. “It’s OK to let the supplier pay the logistics cost, but you’ve got to stay on top of those costs.”

 When it comes to the logistics provider, individual pricing elements should not distract from the overall picture. “Transaction logistics costs are only one piece of the puzzle,” Levy says. “It is important to compare transaction costs port to port or warehouse to warehouse.”



A lot of nerves were frayed in February and March last year, as cargo piled up at West Coast ports owing to the standoff between labor and terminal operators that nearly paralyzed loading and unloading activities. While electronics and garments produced in Asia were stuck on vessels moored in sight of the ports, California oranges and Washington apples were rotting on the docks at some of the nation’s most active ports. Farther inland, auto workers found themselves forced to slow down as car parts were waiting to be unloaded at the ports.

According to the North American Meat Institute, U.S. meat and poultry shippers were losing $85 million every week their shipments were stuck at the ports.

Shippers, importers and forwarders were increasingly resorting to emergency measures, in some cases diverting cargo from ocean to air. California citrus growers trucked their cargo to the Port of Houston to ship it to Asia via the Panama Canal.

According to one report published in March of last year, more than 40 percent of retailers and manufacturers were planning to shift traffic on a long-term basis to East Coast gateways to avoid a repeat of these problems. As a result, East Coast ports have reported significant increases in Asian traffic. The expansion of the Panama Canal is expected to accelerate this trend.

Some smaller ports have also registered gains. Duluth, Corpus Christi and Vancouver are among the ports that enjoyed record volumes in 2015.

The rise in traffic has left Corpus Christi tight on laydown and storage capacity. “Our general cargo docks are pretty full, especially with wind cargo,” says John LaRue, the port’s executive director. “We’re starting to run out of space in the inner harbor, so we’ve created some additional space in a barge channel.”

Several of these ports are expanding their capacity in anticipation of further growth. Duluth, which saw a 40 percent surge in tonnage last year, is in the middle of its “intermodal project,” an $18 million redevelopment undertaking on a 28-acre pier. This will triple the terminal’s outdoor storage capacity, add a new Ro/Ro dock and two new berths along a reinforced dock wall. It will also double the port’s handling capacity for rail and truck traffic.

The Port of Albany is spending some $15 million on the redevelopment of a wharf that will allow trucks to roll on and off vessels, and another $8 million on a warehouse on the site.

 The Port of Cleveland is planning to set up a new warehouse and acquire a reach stacker to improve efficiency on the dock. It recently commissioned two new mobile harbor cranes to boost its vessel loading and unloading capacity. This was undertaken in May, when Lubrizol Corp., one of Ohio’s largest exporters, announced it would be shipping its specialty chemicals to Europe through Cleveland. The company’s decision was the result of a bold move made three years ago, when the port of Cleveland signed an agreement with vessel operator Spliethoff Group to run a weekly service to Europe, which kicked off the following year. It is the only scheduled ocean service between the Great Lakes and Europe.

The move has resulted in a rapid rise in traffic through the port and accolades for its management. The port’s container volume was up nearly 475 percent after just one year.

The Port of Albany has also set its sights on container services, albeit on a less ambitious scale. It is looking to establish a container barge service to the port complex of New York and New Jersey.

A regular container shuttle project on the West Coast failed to gain traction. In the summer of 2013, California’s Port of Stockton launched its Marine Highway project, envisaging a volume of 900 shipping containers per week between Stockton and Oakland. Failing to reach that volume, the operation was suspended after a year.

Vanta Coda, executive director of the Duluth Seaway Port Authority, says that the Great Lakes ports offer a value proposition but the time has not yet come for this. He reckons that a transatlantic container service from the Great Lakes is still too soon for the market. “I don’t think the time is right and the shipping community has not seen enough pain on the East and West Coast,” he says.

Despite the setback on its Marine Highway project, Stockton remains in expansion mode, fuelled by record vessel activity in its waters last year. In the main, its latest drive aims at improved access to the port through a road expansion project, and plans to boost rail capacity.

Better rail capacity is a key plank in the plans of several ports bent on building up their traffic. Port Canaveral, which is seeking to carve out a niche for itself in the project sector, has ample laydown area and can readily access heavy-lift cranes, but it lacks a rail spur to the docks. For Alberto Cabrera, senior director of Cargo Sales, getting a rail link to connect all cargo berths to the Florida East Railroad is a top priority.

 “We hope to have this completed by 2019,” he says.

The Port of Longview in Washington plans to add a rail track and two 7,000-foot sidings to the existing two tracks of its industrial rail corridor this year. This will allow three simultaneous train movements plus storage of two trains on side tracks. Longview completed a $21 million rail corridor back in 2005, which was critical to attracting a $230 million export grain terminal to the port.

Corpus Christi is in the second phase of a rail yard project that includes a unit train siding capable of storing a full 160-car unit train. According to LaRue, this should be completed in the fourth quarter of this year.

Port of Vancouver, which recently completed an overhaul of its train and road access, struck a deal last year with Tesoro for the establishment of a $210 million energy terminal capable of handling up to four trains with 100 to 120 cars carrying oil every day. This added a second strand to the port’s expansion strategy, which was built on project cargo, notably wind energy.

In May this year, Port of Toledo announced an agreement for a high-tech axle manufacturing plant at its Overland Industrial Park, the first tenant on the recently redeveloped site. At the small end of the scale, the port authority announced a partnership in March with the Economic and Community Development Institute to provide small ventures with access to capital and technical assistance. Dubbed the Microenterprise Development Initiative, it is for qualified microenterprises and entrepreneurs in Lucas County and the Greater Toledo area.

Joe Cappel, Toledo’s director of Cargo Development, says that the venture is meant to nurture business in the region. Firms do not have to use the port to be eligible, but they would be very welcome, of course. 


A malfunction of the main rotor at a power station in the Malaysian state of Sarawak this past April prompted a scramble to send a 19-ton portable welding system, alongside other equipment needed for the repairs, to the stricken site. An Ilyushin 76 cargo aircraft operated by Russian freighter airline Volga-Dnepr had to be chartered to carry the cargo to Bintulu in Malaysia.

All 11 pieces of cargo in the shipment were packed in special crates for transportation and were loaded using a three-ton capacity forklift vehicle.

The shipper had little room for choice—no freighters large enough to carry such a load call on a scheduled basis at Bintulu, and only a few aircraft types outside the military can accommodate outsize loads. Chartering a plane was the only option.

The only Western-built freighter that can take outsize cargo today is the Boeing 747. It is not only the largest model but also the only one that can be loaded from the front. According to one 747 operator, less than 10 percent of its cargo requires nose loading capability.

Even the 747 has limitations, however, and they’re caused by the size of the opening. Shipments of larger dimensions require the Antonov-124, a Russian/Ukrainian freighter designed to take loads up to 150 tons. This aircraft is frequently used to carry large generators, train engines, satellites and outsize equipment used for oil drilling or mining. Shortly after the Bintulu charter, Volga-Dnepr—which operates a fleet of AN-124s alongside its Ilyushin-76s—moved a 59-ton compressor from Zurich to Singapore for inclusion into a bespoke oil rig build.

For American shippers and their agents, chartering an AN-124 is not always possible. To obtain the necessary permitting from U.S. authorities, they must demonstrate that there is no Western-built freighter that can accommodate the shipment and that it has to go by air, according to Derek Traylor, charter manager, Americas, at forwarder CEVA Logistics.

A charter may suggest a departure within hours, but this is rarely the case with international shipments. For one thing, aircraft are seldom in the location for the intended departure, but even if they are, there is paperwork to be sorted out first.

“It’s hard to say what lead times for charters are. There are so many different factors,” says Traylor. “The first point is, how long does it take to get the permits in place? If your charter goes to Japan, you need 10 days for that. To Europe or South America it’s usually three days.”

He points out that not only the jurisdiction at destination comes into the picture but also countries in the flight path. Some, such as Israel, take even longer to issue a permit than destination countries.

“You may reroute the flight to avoid that country, but that costs more. But if you spend a lot of money on a charter, a few thousand dollars more won’t make much of a difference,” Traylor says.

Often it takes time to prepare the shipment for the journey. When Volga-Dnepr moved the 59-ton compressor to Singapore in April, a special frame had to be constructed first. This served two purposes: spreading the weight of the compressor throughout the cargo cabin of the freighter and also protecting a delicate overhanging high voltage box from movement throughout the transportation process to avoid putting undue stress on the connection and causing any damage.

“The HV box couldn’t be removed for transit because it contained sensitive electrical wiring which was directly connected within the compressor housing and the customer wanted to avoid sending an engineer to Singapore to re-assemble it, which would have added more cost and a potential time delay to the project build program,” recalls Alan Baldwin, Volga-Dnepr’s business development manager.

Aircraft availability can also be a stumbling block for quick departures, although this is less of a problem in the current market conditions. According to two charter brokers, getting ahold of a suitable freighter is usually not a problem these days, as several industries that usually regularly need charters are going through a slow period. Oil and gas exploration has been hit hard by the slump in energy prices, and the contraction in demand for commodities has depressed activity in the mining sector, says Justin Lancaster, group commercial director at Air Charter Service.

From the other end of the equation, the overcapacity in regular airfreight activities and the ensuing erosion of their yield have prompted airlines that were traditionally reluctant to embrace charters to review their strategy and spend more time chasing charter opportunities.

“Charter is part of our core strategy, it is not an afterthought. We intend to run a certain number of charters per year. It’s in our budget,” says Shawn McWhorter, president for the Americas at Japanese freighter operator Nippon Cargo Airlines. NCA purposely creates down times in its schedule to accommodate charter requests, he adds.

As often as not, the strategy does not yield a full charter but a diversion of a scheduled flight. “We get a lot of charter requests that are not for full plane loads,” McWhorter reports. Rather than dedicate an aircraft to a charter operation, a better solution is to divert a freighter on a scheduled route to make an extra stop to pick up such cargo.

Several airlines have been chasing such opportunities lately, notes Traylor, adding that these carriers are happy to supplement their loads on scheduled sectors in the current market conditions, provided the additional stop does not create problems with the schedule.

In North America, NCA is reluctant to head down to Miami for a single load, but there are a lot of viable points between New York and Tokyo, McWhorter says. The Japanese airline aims for one or two diversions a month. Many shippers and forwarders mistakenly believe that full charters are more reliable than diversions, but the cost savings are hard to ignore, McWhorter adds.

“Diversions save customers a lot of money,” confirms Traylor. Chartering an aircraft remains an expensive option, even though the lower oil price has reduced the hit on shippers’ budgets somewhat.

 According to one forwarder, charter rates to Asia have come down from previous levels of $1 million to $1.2 million to the $800,000 to $1 million bracket. To Europe the bill may come down to about $500,000 if the aircraft is already in the region and does not have to be flown over first.

Cost savings can be wiped out by mistakes in the information that shippers provide to charter brokers. Traylor cites a recent instance where the shipper had supplied inaccurate information about the size of the shipment, which turned out to be two inches higher than indicated. As a result, the cargo did not fit into the Ilyushin 76 that had been lined up for the job and a larger aircraft had to be ferried in to take the load. On top of the costs involved, the shipper had to live with the longer time needed, Traylor says.