Weighing slow-steaming costs

Weighing slow-steaming costs    I am a regular reader of your magazine and I find it to be a very useful and comprehensive source of information, with well-researched and documented topics. However, I deem it necessary to intervene in respect of the article titled 'Slow burn' (January American Shipper, page 34).
   In this article, Eric Johnson's reports on the contents of a session held at the Global Shippers' Forum in Dubai in early November 2009 on the subject of shippers' reactions to the implementation of slow-steaming. Referring to the example of the Asia/Europe trade, I am supposed to have said: 'With 12 ships, stock levels will suffer, but we are willing to take slower transits if we can reduce our stock levels' by essentially storing stock on the transiting ships. Regretfully, this is not an accurate presentation of my intervention in the debate.
   What I actually said is as follows:
   Some carriers are carefully considering deploying super-slow-steaming on the Asia/Europe route, and we could see loop composition moving from eight ships (in the recent past) to nine ships nowadays and up to 12 ships in the future.
   In that scenario, total round-trip time would move from current 63 days to 84 days. Seen from a shipper's perspective, this is a big change.
   When carriers moved from eight to nine ships per loop, producing an extended transit of three to five days per direction, in my company, we found it acceptable and could integrate it in the stock levels as it came along with the 'guarantee' of a better schedule reliability.
   However, the 84-day round trip, if the westbound voyage is kept at 30 days, presumably because cargo is considered to be of a better value, would mean an eastbound voyage of 54 days.
   It follows that stock levels will suffer quite a lot, and looking at it from a total cost perspective, this will cost a lot of money. We need to take a good measure of what it means.
   Longer transit times increase inventory tied up, which has a cost attached to it. Actually, the 'good measure' I alluded to is the need for shippers to evaluate what one day more transit time due to slow-steaming produces:
   ' In operational cost savings for carriers.
   ' In increased inventory costs for cargo interests, based on a cargo value table.
   We would then draw conclusions as to who benefits from what, and in which degree.
   Most shippers realize that the days of commercial speed at 22 to 24 knots are over and a new balance has to be found that is economically sound and environmentally responsible. But the evaluation mentioned above has to be carried out before any statement of support can be made.

Jean-Louis Cambon
head, ocean management committee,
Michelin
Paris