Exporters may face multiple year shipping crunch

Exporters may face multiple year shipping crunch U.S. exporters' difficulties in securing ocean transportation for their products may not go away anytime soon, said participants in a roundtable discussion Thursday.
   While exporters may get a bit of a breather in coming months as the peak shipping season causes some carriers to increase capacity, the space crunch for outbound shipments is likely to be a “multiple year problem,” said Ed Zaninelli, vice president of the transpacific westbound trade for Orient Overseas Container Line.
   Zaninelli, in a discussion broadcast over the Internet from the Philadelphia headquarters of the logistics company BDP International Thursday, noted exports grew about 15 percent in 2007 and were up by a similar amount in January of this year.
   As carriers have trimmed inbound capacity to the United States because of weak demand and low freight rates, and exports have boomed because of the weak dollar and demand for raw materials, many exporters are having difficulty obtaining space on vessels or containers at inland locations.
   J.A. “Pepe” Gonzalez, global leader for international trade operations and marine packed cargo at Dow Chemical, said last summer the company started to see a lack of available space on ships to South America, which then spread to services to Europe and Asia.
   “We have experienced a vulnerability in the supply chain that we have not seen in years,” Gonzalez said, with the exception of the situation after Hurricane Katrina. And while customers could readily understand the problems resulting from storm damage, the current situation is difficult to explain given what is “still a huge trade imbalance into North America based on imports and exports.”
   The results for his company have been longer cycle times to fill customer orders, compromised ability to deliver product on time, and the need to keep additional inventories, he said.
   “In specific markets where we have aggressive targets to seed and grow, our capacity has been hindered,” he said.
   Eugene Galdi, director of procurement, logistics and transport services at Honeywell, said one result is that logistics professionals have to spend more time doing the same amount of work.
   “What might have been a weekly supply chain event between distribution and the plants is now a daily event,” he said.
   “When customers hear something will take weeks longer than it normally would it is news to them,” he said. “It has been our responsibility to go out and educate each one of our sister groups and/or our customers and explain that this is not a one company specific issue — that it is a North American issue,” he added. “Once they hear from three or four suppliers they understand that.”
   Michael Andaloro, chief operating officer of BDP International, said the problem has become “too large to ignore,” leading it to sponsor Thursday’s webcast. The discussion was moderated by American Shipper Editor Chris Gillis.

Gillis

   (For more coverage of this issue, see the cover story “Exit Strategy,” in the April American Shipper, 54-59.)
   “The root cause is related to the weak U.S. dollar, which has contributed to record demand for U.S. goods, and if we look into the future there is no significant signs of the dollar strengthening and that means demand for U.S. goods will continue unabated,” Andaloro said.
   “If we don’t take proactive measures at this point in time, the situation will only continue to deteriorate and hence our focus to bring together various elements of the supply chain and collaborate to find solutions,” he said.
   Zaninelli noted that crunch has intensified because of globalization and the decision by some shippers who had previously relied on bulk vessels to carry their goods to use containers for commodities such as grain and scrap metal.

Zaninelli

   In addition, the rising cost of truck and rail transportation has made carriers less willing to reposition equipment to customers, particularly at inland locations.
   “This is not a one carrier problem — most carriers are feeling the same pressure,” noted Allen Clifford, executive vice president commercial of Mediterranean Shipping Co.
   He said carriers must deal with the problem by being fair and allocating space to all industries. He also emphasized the importance of advance planning — booking cargo far in advance and notifying carriers in advance if a problem is going to prevent them from being able to meet a cargo commitment.
   “You can’t book in two days and load it. You got to do a lot more planning. It is not on the fly anymore,” Zaninelli said.
   Clifford said one way that shippers can overcome a shortage of equipment is to bring cargo by truck or rail to the port or other location where containers are in surplus and transload into containers.
   As for solutions, Andaloro said carriers may need to book cargo far in advance. “Now to Asia we are looking four to six weeks forward.”
   He said that when booking cargo, he may need to call four to six carriers instead of just one carrier, and look at alternative ports.

Keene

   Thomas Keene, president of BDP Transport, said shippers may be able to obtain equipment if they are willing to help offset the cost of repositioning it to inland locations. Bringing cargo to a port and transloading it may be a good option, he said, but he noted this will also raise questions about packing and handling.
   “There could be possible claim issues,” he noted.
   In addition, Andaloro said, while transloading may be a ready solution for the occasional shipment, if it is going to be used regularly, the shipper needs to look at whether it is “sustainable cost-wise.”
   Keene noted that non-vessel-operating common carriers like his company can offer shippers some flexibility because of their contracts with multiple carriers from many ports on many routes. “We have a lot a flexibility to shift bookings among carriers.”
   Exporters are also likely to see rates increase and long-term contracts more difficult to obtain.
   “We are in a situation where we can barely keep our heads above water,” Zaninelli said. While rate increases for some shippers in the past year have been significant, “we are not even close to full cost recovery. Costs are growing faster than what we can charge the customer or put general rate increase through.”
   If carriers are able to reach full cost recovery by the end of the year, “then we may see longer term agreements than the 90 day ones were are doing now,” he added. ' Chris Dupin