This fireside chat recap is from Day 8 of FreightWaves Global Supply Chain Week. Day 8 focuses on global maritime logistics.
FIRESIDE CHAT TOPIC: The shift in power from shippers to ocean carriers
DETAILS: The balance of power between ocean carriers and cargo shippers has changed. Carriers are now firmly in control — with major implications for service contract negotiations and spot rates.
SPEAKER: Tom Craig, supply chain and logistics consultant
BIO: Craig offers consultancy services to companies in many industries around the world, drawing on his experience with corporations such as GE, Abbott and 3M. He has written two e-books and over 90 papers on supply chain management and is on the advisory board of the Logistics & Supply Chain Management Society.
KEY QUOTES FROM CRAIG:
“As for the current situation, the polite word is ‘chaos.’ There are two things at play here. One is the pandemic. The second is the house-of-cards, kick-the-can-down-the-road situation that is underlying what is going on. With the pandemic, it’s no longer a hidden issue.”
“Historically, the control was with the shippers. Now, in the space of less than 12 months, we’ve had a shift, a flip. The heads are now the tails. The carriers are controlling capacity. So I think [for shippers negotiating annual contracts] waiting is a bad hand. Carriers are sitting on the power hand. And if I can’t make a booking or get a container or get on a ship, I’m not feeding my factories if I’m a manufacturer, and I’m not feeding my stores if I’m a retailer.”
“I think we need to stop doing loose agreements that you can get in and out of when the market changes and realize that we’re going to have to do some firm contracting. If I’m a shipper and I’m going to commit my volume in a certain time frame, then I’m going to need to put resiliency into my service contract, which means I’m going to have to ask the carrier to define ‘service.’ I’d want something that’s definable and measurable — with penalties [for nonperformance]. Until we do that, this problem we’re experiencing doesn’t ever get under control.”