Shippers at the Agriculture Transportation Coalition (AgTC) conference voice concerns over container industry consolidation, lack of carrier communication and dedicated customer service reps, demurrage fees, and varying port terminal hours.
Demurrage fees. Industry consolidation. Outsourcing. Varying shipping terminal hours. These are the just a few of the issues that figures within the agriculture transport industry say can give them headaches at times.
However, some say they have ideas to help fix what they think is a broken—or at least substantially damaged—supply chain.
During a panel discussion at the annual Agriculture Transportation Coalition (AgTC) conference in Long Beach, Calif., this past June, leading agricultural and forest products exporters and importers talked about their experiences and strategies to ameliorate the above mentioned issues and more, from routing to avoid port disruption to documentation and carrier service challenges, container availability, rail service, and trucking shortages.
Delayed Response. One major pain point, some members of the five-person panel said, is a delay in response times on loadings due to customer service teams moving outside the United States.
“This is an issue because we don’t have time to wait,” said Allison Baker, an international logistics manager with the U.S. headquarters of JBS, a Brazil-based processor of beef, pork and lamb. “Especially with JBS, because of our size, doing 600-650 FEUs a week, we don’t have time to wait. A lot of the sales are dependent on us making a decision and getting it quickly. It can make or break a sale.
“If I send an email to an ocean carrier and it takes them two days to get back to me, the sales guys already lost the sale. They already have somebody that could do it cheaper, or even faster,” she explained. “Some of our chilled product in our containers costs over $250,000 per container; we have to know, and we have to know now.”
A lot of the sales are dependent
on us making a decision and
getting it quickly. It can make
or break a sale. If I send an
email to an ocean carrier, and
it takes them two days to get
back to me, the sales guys
already lost the sale.”
Allison Baker, international
logistics manager, JBS
Elena Asher, an assistant director of export logistics with Missouri-based Dairy Farmers of America added that having U.S.-based customer service representatives makes a huge difference.
“It’s so important to have decision makers in the U.S., because I get so tired of hearing ‘I’m waiting for so-and-so to respond, it’ll be at least 24 hours, oh they were on a vacation or a holiday,’” she said. “It’s exhausting having to wait. The hassle factor is huge.”
Another issue that has caused consternation among agriculture shippers of late is the detention and demurrage process, or more specifically, when the amount of free time remaining is not known and they can’t seem to get straight answers from their service providers.
“We just need to know,” Baker said. “If you can’t grant additional free time, at least come back and tell us that the answer is ‘no.’ We don’t have time to wait two or three days for you to come back with an answer.
“Our JBS office in Brazil adds all the free time that’s in our contract on the ocean bill of ladings,” she added. “Why can’t we do that in the U.S.? That would solve all the problems that we have. Our customers would then have full visibility. The terminals across the destination would have visibility to what free time has been already contracted.
“Why can’t we put that on the OBL? That would save so many people so many headaches.”
Communication Breakdown. Somewhat unsurprisingly, another topic of conversation at the AgTC conference was the acceleration over the last few years of the trend toward ocean carriers forming cooperative alliances in which they each contribute vessels to shared service loops and swap cargo space on one another’s ships.
Five years ago, the only alliances in the major east-west trades were among some of the mid-sized lines, mostly in Asia with the exception of Hapag-Lloyd. Now, nearly every major remaining carrier in the those trades belongs to one. Within the past couple of years alone, Maersk Line and Mediterranean Shipping Co. (MSC), the two largest container carriers in the world, established the 2M Alliance; COSCO Shipping, CMA CGM, Evergreen Marine and Orient Overseas Container Line (OOCL) formed the OCEAN Alliance; and Hapag-Lloyd, Yang Ming, NYK, MOL and “K” Line teamed up to create THE Alliance.
Most of the panelists said that the new alliances have had an adverse effect on their supply chains, but it remains to be seen whether the problem is merely a short-term one or something more fundamental and therefore likely to persist.
“We have constantly changing services due to the new alliances,” Baker said. “Some of the cargo, after it’s sailed, then the schedule’s changed. We can’t have that happen. That product has a shelf life—a very, very short shelf life. And with each container being $250,000, who’s going to pay for that? We have to, when our customer claims the product didn’t arrive on time.”
She said that speed of communication and service—or rather the lack thereof—is an issue that extends beyond her company’s export volumes to things like inland availability for equipment like containers.
“This is completely dependent on the import volumes, so we’re at the mercy of the ocean carriers,” Baker explained. “For the reefers, this is not as big of a problem as it is for the dry because we do this based all on allocations. But when the carrier doesn’t bring that equipment inland, who’s to blame? There’s no penalty. There’s no repercussion. There’s no anything for them to be responsible for that cost.”
Greg Jackson, an export sales manager with Border Valley Trading, a hay and forage exporter located in Brawley, Calif., less than an hour north of the U.S.-Mexico border, said that industry consolidation has been most detrimental in terms of the lines of communication between shippers and carriers.
“What we are seeing recently is that some shipping lines that had really good customer service that we were very happy with and booked heavily on, all of a sudden have totally dropped the ball,” Jackson said. “Bookings got split, our containers got reduced with no explanation, so it’s really frustrating when we work hard to develop the best possible relationship with carriers and then all of a sudden, things change.”
Almost all of the panelists said that good communication among shippers and LSPs is paramount if things are expected to run smoothly, and that poor communication—or worse, none at all—is a recipe for confusion at the very least and potential disaster at worst.
“Advance communication reduces and eliminates extra costs,” Baker said.
“We have been told in the past to make out-front bookings, but at the end of the day when we do that, it doesn’t do any good,” she explained. “The day the driver goes to pick up the container and there’s no container there, that’s the day we find out, because no ocean carrier sends you an email in advance and says, ‘By the way, you’re out of equipment even though you have 63 dry containers booked this week.’
“We’ve asked in the past to do shipper-owned containers,” she said. “Very, very few ocean carriers will allow you to even do shipper-owned containers. And if they do allow you to, they want to charge you a massive surcharge.”
Lack of equipment can add easily add $1,000 in cost to one container, Baker said, because of the cost for a driver to sit there and wait.
Exacerbating the communication problems is the fact that many ocean carriers no longer have a designated representative to deal with specific customers and their needs, something that seems to have been lost in the shuffle during the recent consolidation.
“It’s something that we used to have— 100 percent we used to have [a designated contact],” she said. “It has only deteriorated over time. We’re constantly being told that we need to do more with less. How do we do that when it takes two days just to get a response, or to do anything?”
Terminal Timing. Inconsistencies in the operating hours for container terminals also pose a problem for agriculture shippers, Jackson said, as the days and times a terminal is open can vary widely from one facility to the next.
“Some are open Saturdays, none are open Friday nights, and it puts a big strain on our logistics,” he said. “We would like to see more consistency in the terminals, expanded ERDs (earliest receipt dates). Make it as easy as possible for us to in-gate our containers and pick up the empties.”
But even with all the current overlap when it comes to ships and routes, the panelists said it’s still possible to differentiate between the service of one carrier vs. another, even among those in the same alliance.
“It all comes down to response time and following through on the things that they do,” Baker said. “Even every single one of our customers today could tell you who provides good customer service and who doesn’t.”