New Trends Driving the Transpacific Trade

By David Bennett
Vice President, Global Logistics Sales, Schneider Logistics International

Tired of the gloom and doom? Over the course of the last several months, I have covered a wide range of topics associated with the current economic environment and the challenges it has created in the trade. It is time to put aside the doom and gloom message that everyone has read and heard about, from all the stakeholders, and focus on the opportunities that are available as a result of the challenging environment.

It’s a simple fact — we have too much capacity in the trade. Until we begin to see improvements in economic conditions, we will continue to see ocean freight rates at non-compensatory levels, which will result in some form of consolidation within the industry. I have noted several times in recent months that history repeats itself, and contrary to what some others may have you believe, this is not the first time we have seen a sharp downturn in the trade environment, nor will it be the last. In the meantime, we must find creative ways to improve the flow of goods throughout the supply chain and gain some long-term cost efficiencies.

Opportunities in Tough Times

As many of you know, you have been challenged by senior management to cut costs. Unfortunately, many in our industry have seen their positions eliminated, and many of our colleagues are suffering as a result. The quickest way to improve the bottom line in these times is through the difficult decision of eliminating headcount.

However, based on the analysis that our team at Schneider Logistics is conducting, I am convinced that significant cost savings are achievable by restructuring the flow of containers into certain regions of the country that have historically been serviced by the ocean carriers’ intermodal services. Later, I will suggest some alternatives that you may find intriguing, but for now, let’s quickly review the challenges ocean providers have in this environment. Keep in mind they face the same challenges during good times.

Ocean Carrier Challenges and Needs

Last spring and summer when the U.S. dollar was soft, we saw a huge increase in exports, which allowed ocean providers sustainable revenue on the return of containers to Asia. However, the U.S. dollar has strengthened significantly, and this short-term trend for booming exports has evaporated almost overnight.

In previous environments, ocean providers were simply looking for a “better than empty” revenue stream to reposition containers. The trouble areas for empty repositioning are clearly on the inland movement of the containers, which offer limited revenue opportunities. What happens to your negotiating position with your ocean carriers if you tell them you will eliminate this challenge and keep the flow of containers on a port-to-port basis? This eliminates or reduces intermodal costs inland and the high repositioning cost results in a quick return of the container back to Asia where they are needed, even in these difficult times.

Solutions for More Cost-Effective Flow of Goods

We’ve just eliminated a trouble spot for the ocean carriers by keeping their containers confined to port-to-port moves. Schneider Logistics’ team of engineers has completed numerous studies this year, and the transload model clearly offers significant savings potential. With fuel prices showing signs of stabilizing, the domestic piece of this model is sustainable for the foreseeable future, which is a key to such a dramatic shift in your supply chain.

My point is that in spite of this challenging environment, there are opportunities to look at your supply chain and remove cost, while improving efficiencies. The added advantage of pursuing new means of moving your products through this model is the positive environmental impact. You are able to transload three 40-foot standard containers into two 53-foot domestic trailers/containers. Once these move via the intermodal network, you have eliminated the movement of one ocean container to the domestic distribution point, a positive for the environment and your bottom line.

We’ve all heard the saying, is your glass half empty or half full? Mine is half full, and I continue to remain optimistic that in spite of the doom and gloom forecasts and difficult operating environment, we have some great opportunities to improve the flow and cost of goods through each of our respective supply chains.

In This Issue

News, Trends & Analysis
New Items

Glimmer of Recovery

Supply Chain
A Quick Primer on Site Selection

Managing with the Supply Chain in Mind

Compliance Corner: Trade Compliance Requires a Focus on Information Gathering

How to Green Up Your Logistics Operation

Supply Chain product review
Trucking Software

Special Section
Creating the Extraordinary — the Prince Rupert Story

Features
Building a Future from Drayage Wreckage

Gateway at a Glance Pacific Northwest

Ports & infrastructure
Stimulus Bill Has Cash for Ports . . . for the Right Projects

What Shippers Need from Inland Ports

Port Product Review
Lift Trucks

Commentary
New Trends Driving Transpacific Trade

Who, What, Where, When

Final Say