While the jury is still out on the impact the new ocean carrier alliances will have on international supply chains and the processing of goods at international ports, some preliminary research suggests much of North America’s trade community remains relatively indifferent to the major changes taking place.
The research, conducted by Livingston International, an international freight and transportation solutions provider and trade-services company, reveals three-quarters of respondents confessed to not knowing these changes were taking place at all. Even after being alerted to the changes, only a little more than one-third expressed a level of concern around the impact of the new alliances.
Among those who did express concern, a modest portion plan to take preemptive action, such as:
· Adjusting expedite budgets to account for increases in lead times
· Contacting carriers to ensure they will be stopping at the relevant ports
· Lowering contractual amounts and working with more than one alliance
· Being sure to secure space with other carriers
· Working with a forwarder to help move containers that get bumped or delayed
· Adjusting costs in anticipation of higher pricing
The issue of pricing seems to be a sensitive one. Despite the relative ease with which the new alliances are being received, 72 percent expressed a high level of concern that cargo rates would increase. Such concerns are warranted and expected, but rate hikes are only one possible way costs could increase.
To be sure, the new alliances are by no means going to bring global trade to a standstill. However, the short term is likely to result in ad hoc disruption as individual carriers find their footings within their new alliances. The number of transshipments is likely to increase, leading to greater potential for errors and delays, and ports will need to accommodate vessel sizes they may not have had to accommodate in the past.
These short-term disruptions could result in sluggish movement along key trade lanes, backups in international supply chains, delays in ground transport, inventory management and warehousing challenges, increased ground transport costs and a host of other “hidden” costs for shippers.
Granted, there is no way to entirely eliminate the possibility of disruption, but some of the measures referenced above will certainly serve to put shippers in a more advantageous position to identify where disruptions may occur, and take measures to reduce any negative impact that may occur.
One key item absent from the list is the notification to vendors and partners that alliances have shifted and may affect transit and/or processing times. This is critical to ensure partnerships aren’t tarnished and that more permanent damage isn’t done to international supply chains.
Having a Plan B will also be critical, particularly for those businesses engaged in just-in-time shipping practices. Using multiple carriers is certainly one way to avoid getting caught up in the delays of a single carrier, but doing so through a forwarder can save leg work and identify those carriers who are least likely to cause further disruption. It’s also a good way for multinationals to seamlessly ensure they’re working with alternative carriers that are compliant with international marine safety standards so that they’re not inadvertently taking on more risk.
The new alliances have only been in place a few weeks, which means that any newfound hiccups within the new world order of ocean freight are likely to become apparent quite imminently. At that point, shippers (and their trade-services partners) will be able to predict more accurately just how much they’re affected (if at all) and the degree to which they’ll need to course-correct their supply chains in response.
Until then, it’s a game of planning for the worst while hoping for the best.
Mike Meierkort is president of International Freight and Transportation Solutions at Livingston International, a trade services company specializing in freight forwarding, customs brokerage, global trade management, and trade consulting.