Ocean service reliability a bone of contention
Shippers need to 'get real' when it comes to ocean service reliability and shouldn't expect any compensation for delays, according to a European manager with Korean container shipping company Hyundai Merchant Marine.
Martin Etheridge, manager of transatlantic trade management for Hyundai Merchant Marine (Europe) Ltd., said the perception is that carriers are doing a poor job of maintaining their schedules, but the reality is that they are 'remarkably good' considering the difficulties they face.
Etheridge said that while Drewry Shipping Consultants data showed the best performing lines in the Far East to Europe trade were on time only 69 percent of the time, the average number of days later than the port estimated time of arrival was often less than 24 hours.
Philip Damas from Drewry later pointed out that the results were far worse for other trades such as the transatlantic and Europe/Africa.
'Of course, there is room for improvement. However, those wanting ultimate perfection live in a fantasy world, where terrorism, labor strikes, global warming and landlocks do not exist,' said Etheridge at the Containerisation International 10th Global Liner Shipping conference in London Tuesday.
'The possibilities for schedule disruption are endless and are affected by many, many internal and external factors. It's impossible to please all of the people all of the time and the sooner those involved in international trading get real the better.'
He added that it was unreasonable for customers to accuse carriers of failing to meet expectations when a ship arrives in a port a matter of hours late after a three-week voyage.
'Service contract agreements are not guarantees of performance, but do state that space will be provided on regular scheduled vessels over a longer period of time. A balanced approach is required based on operational efficiency enabling consistent as opposed to erratic decision-making.
'Should shippers be reimbursed for unreasonable delays? Straightforwardly the answer is ‘no,’ since international trade is dealt with on the basis of risks, which the buyer and seller have to gauge.
'Planning is everything and whilst lines will do everything possible to assist in damage limitation when risks have not been properly assessed, such assistance should not result in financial reimbursement under normal circumstances unless negligence is proven.
'If affirmative then carriers should be able to claim dead freight from their shippers, which for a variety of reasons would not work, since similarly production also can fail for a variety of valid reasons.'
Giving a shippers' perspective, Adam Rashid, international solutions manager with Sony Supply Chains Solutions Europe in the Netherlands, said his company always adds an extra day when calculating its port-to-door lead times as a safety margin for potential delays.
Responding to Etheridge's presentation, Rashid said: 'It's not enough just to say what we (container lines) are doing is very difficult, that there are a lot of issues, the service is good enough and you (shippers) don't understand. I'm sure that we can do better and if we work together somehow we can do better.'
Rashid said his company uses a number of criteria when selecting a carrier to move its goods with service reliability paramount in its thinking.
'It's not specifically speed that we're always after. The key issue is reliability. We need to be able to plan when our goods are going to be available so that we can sell them down the line. If we can't, it starts to get difficult.'
Sony's annual ocean freight volume into Europe amounts to some 54,000 TEUs, almost all of which is imported from the Far East. The company keeps a 'fair amount' of inventory in the low season, but faces a tighter stock situation in its high season that runs from September through December.
'Sony plans future sales and production against in-transit stock. So the lead time reliability is extremely important,' he said. 'In the peak season of course all of the star products are at least very low on stock or out of stock. The consequence of a late shipment in the peak season is quite simple: we lose a sale.'
Rashid expressed frustration that shippers are not made aware of expected port gridlocks and that congestion surcharges don't address the problems.
'If we the shippers are not fully included in the dialogue then for sure we can't help and we're always going to be saying 'it's not our fault,' ' he said.
'We the shippers are paying for the congestion costs through lost sales, increased inventory and freight costs. We cannot pass these costs on to our customers. We make electronics. When did you last see the price of LCD televisions go up? The answer is never. If we put the price up we simply won't be able to sell any.
'It shouldn't be a question of who should pay for the congestion. I think it should be a question of what we all should do about it. The objective should be to manage the congestion and not apportion the blame.' ' Simon Heaney