Features

Mapping Your Ro-Ro Logistics Strategy

By Richard Knee

When you’re mapping and executing your logistics strategy, remember that savvy preventive care and flexibility can take you a long way. That advice comes from James Perduto, vice president of marketing at the U.S. headquarters of Höegh Autoliners.

Words of Wisdom

Perduto’s company is one of the heavyweights among shipping lines in what is known as the roll-on/roll-off, or ro-ro, sector consisting of autos, trucks, farm tractors, and other rolling stock, as well as heavy-lift equipment and odd-size cargoes. He offers these tips:

• Have a very strong understanding of the documentation flow for the unit of cargo. If you don’t have that in house, hire someone who does.

• Take marine insurance. COGSA (the Carriage of Goods by Sea Act) limits the liability of the carrier.

• Try to find the most flexible, nimble carrier, one that can react quickly to any market change.

• Have at least two carriers, so that you can make comparisons on routes, service levels, and rates, and so that you’ll have backup service available when it’s needed.

Tailored Approach

Höegh is primarily a port-to-port carrier, while rival Wallenius Wilhelmsen Line (WWL) is moving increasingly to factory-to-dealer service.

“Ocean carriage is our core business, our number-one focus. But our long-term ambition is to provide all of our customers with factory-to-dealer service,” says Jonathan Spampinato, U.S. corporate affairs director for WWL.

There is no one-size-fits-all formula when it comes to auto logistics, Spampinato says. “There are a whole host of factors we weigh to meet individual customer needs — geographic market (origin-destination), aggregate demands (shippers’ clients as well as the shippers themselves), and environmental.”

“The factory-to-dealer solution really is a tailored approach. Manufacturers have facilities all over the place and (their goods) are sailing to different markets. There isn’t one model we’re going to use for everyone.”

At the same time, he says, the concept “allows our customers to focus on their business, which is manufacturing a product. It is the model that we feel is the future of the OEM (original equipment manufacturer) supply chain.

Volume Forecasting

The ro-ro market is split between new and second-hand, or “personally owned,” vehicles, and the chief difference between them on the logistics side lies in volume forecasting, Perduto says.

Manufacturers typically exchange volume commitments for service guarantees — having vessels available when they’re needed — and they heavily scrutinize carrier quality standards.

He adds that second-hand vehicles “are handled as carefully as any piece of equipment” but often move on a spot-market basis; accordingly, freight forwarders or consolidators (also known as non-vessel-operating common carriers or NVOCCs) are normally involved in moving those products. Volume forecasting is on a “ship-to-ship or month-to-month” basis in the second-hand market while manufacturers typically base their projections on yearly cycles.

New Financial Model

Spampinato believes the current flux in the global economy is prompting shippers to review their supply chain practices.

“The economy’s changing dramatically, and the financial models of the past several years are not likely to be relevant, going into the next year or two. We are looking at how every piece of the supply chain affects overall cost, so customers are likely to get a more cost-efficient model. Some of our customers and some economists are still pretty bullish. Emerging markets still are bright spots; they’re buying lots of agricultural and construction equipment. There are a lot of opportunities, even as the market corrects itself.”

Perduto says Nigeria, Saudi Arabia, Russia, and Venezuela have used their own currencies, including oil, to buy sport-utility vehicles, heavy trucks, harvesting machinery, roadbuilding machines, construction cranes, work trucks, cars, and boats. The current financial crisis has hit Russia harder than it has hit the other three countries, because Russia’s economy is more closely tied to those in the West.

Competition for Containers

Ro-ro carriers reportedly face competition on land as well as on the water from containership operators.

Until recently, space on ro-ro vessels was tight in some of the stronger markets, prompting a number of manufacturers to ship some of their vehicles in containers, and even with volume dips in some markets having produced overcapacity, ro-ro operators are in a marketing fight with container carriers, Perduto says.

“Manufactures are falling off because of the economic situation. Out of Japan, manufacturers are canceling shipments of new vehicles, and that’s creating overcapacity. It happened in about eight weeks, and you have tonnage looking for new markets.”

Spampinato says ro-ro undertonnaging has also caused some volume to shift to landbridge from all-water routing, even though the latter is “more cost-effective.” The added inventory cost involved in all-water shipping doesn’t necessarily make landbridge the less expensive option, and he adds, “Inventory cost depends on the port used, the final destination, inland costs, and delivery dates, which impact stowage costs at the port.”

Furthermore, he says ro-ro operators are experiencing a space crunch on land as port authorities give priority to the container side. Vehicles take up more land than containers do because they cannot be stacked in a yard.
All this underscores Perduto’s advice up front — savvy preventive care and flexibility can take you a long way when it comes to your ro-ro logistics strategy.