Earlier in the week this blog provided commentary and reaction to a recent financial news headline that the world’s largest shipping line, A.P. Moller Maersk, reported its first financial loss in the company’s history. I noted that to anyone involved in supplier sourcing, procurement and logistics, the news is of little surprise given the massive after-effect on global trade as a result of the global recession. I further concluded that a U.S. exporter should remain in the drivers seat for contracting so-called backhaul ocean transportation, freight moving from the U.S. to Asian or European ports. Apparently, this does not turn out to be the case, and something is amiss in terms of customer and supplier relationships.
Today’s Wall Street Journal features a well-written front page story, Export Revival Threatened By Shipping Bottlenecks (paid subscription required), that outlines a landscape of frustrated shippers attempting to ship bulk goods to Asian markets in a timely and cost efficient manner. According to the story: …”producers (U.S. based) of everything from hazelnuts to cardboard are complaining they can’t get their goods shipped in a timely manner.” Shipping delays of three to four weeks have been common, and shippers have become increasingly frustrated with ocean carrier service levels. The picture seems to be one where the ocean carriers want to defy the notion that the customer should be the focal point in determining acceptable service levels. Another concern brought in this article is that some U.S. ports lack the capacity to handle larger outbound shipping activity, having instead placed a primary focus on servicing large volumes of imported container laden volumes.
The picture is one where severe drops in global trade destined to U.S. and European ports has caused ocean carriers to not only severely idle fleet capacity, but also slow down the cruising speeds in existing ships in order to save on fuel. That is like an international airline indicating to a prospective passenger that because the airline has severe financial difficulties the previous eight hour transpacific journey has been extended to 10 hours, so deal with it. Air passengers have the option to select far more options in other air carriers, not so for ocean carriers. We called attention in our previous commentary that the CEO of A.P. Moller Maersk indicated that carriers have too long neglected the less-profitable “backhaul” shipment of goods from U.S. ports, and that there would subsequently be a renewed focus on more customer service. That seems to be the understatement of the year.
It seems to me that ocean carriers, as well as shippers, have lost fundamental perspectives regarding solid supplier and buyer relationship building, and it would be interesting to hear additional commentary from our readers.
Two questions come to mind that may provide more perspective to this ongoing problem.
In the end, do ocean carriers exist solely to serve their shareholders, or to serve shippers? Are cutbacks in service levels, fuel surcharges or fleet capacity impacting the cost and service level needs of shippers? Have these carriers become too arrogant in their view of shipper relationships?
Conversely, shippers have also been mandated to respond to the effects of severe recession. There has been resurgence in the application of reverse auctioning and other hard nose procurement negotiating practices directed toward services-related procurement, including transportation. Has this trend soured any notions of supplier collaboration and mutual trust-building? Have procurement practices subsumed any notions of building long-term carrier relationships?
Share your views and let us collectively ascertain what the real problems may be.