Grading the Carriers: How are your service providers doing?

CBN reporter Rick Knee surveys customers

Early this summer, a series of events, including a communications lapse by an ocean carrier, caused a Tokyo-bound shipment to arrive nearly two months late.

The good news, said Bill Yennie, the freight forwarding specialist who dealt with the shipping line, is that cases like that are more the exception than the rule. Generally, carriers do a good job on the information side and in what they’re really being paid to do — deliver cargo — said Yennie, who is export manager at J. W. Allen & Co. in Kenner, La.

A number of freight forwarders shared Yennie’s assessment but some warned that carrier efforts to reduce the capacity supply-demand ratio bode an increase in container rollovers and a rise in rates, and one said that all parties along the supply chain need “to get a better education of how the supply chain works.”

In the episode that Yennie described, the carrier pulled out of the Tokyo-bound shipping lane while the vessel was in mid-voyage, and the shipment was deposited at Yokohama. The J. W. Allen firm didn’t learn of this until close to three or four weeks later, when “our client’s client called and said, ‘Where’s our shipment?’” Exacerbating the problem was that a partnership between a number of the large shipping lines and smaller intercoastal carriers had ended, so his company had to scramble to find someone to get the cargo to Tokyo, which took another three weeks, he said.

Normally, carriers provide four to five weeks’ advance notice when they plan any service revamps, he said. “They communicate well on the things they want to communicate about,” he said.

Service realignments a challenge
Service realignments have caused problems for Poseidon Forwarding Co., Inc., a freight service provider in Roswell, Ga., specializing in perishables movements. “Some carriers did pull out some service trade lanes to Asia, resulting in longer transit times by approximately 15 to 20 days,” said Teresa Pittillo, the company’s owner and president. “Shippers could not afford to finance the loads another two or three weeks. Shippers spent more money to ship with other carriers that could provide a faster transit time.”

Communication is key
“Almost every major carrier has an elaborate tracking system through their Web sites. They do an excellent job transferring information,” said Roger M. Clarke, president of Williams Clarke Co. in Los Angeles, who talked about the need for supply chain awareness.

A major problem on that front is that overseas shippers load their containers beyond the 80,000-pound limit that applies to over-the-road haulage in the United States, preventing importers from retrieving the boxes immediately at the port of arrival, said Clarke, who added, “It happens especially with reefer (refrigerated) shipments.”

When a container arrives overloaded, it must remain in port while the consignee or its agent finds a drayman and equipment to handle the surplus cargo, he said. “You’re talking some pretty big demurrage bills three, four, five, six thousand dollars. Who’s going to pay for it?” he said.

In addition, with U.S. authorities having imposed new cargo security requirements after the 9/11/01 terrorist attacks, “everybody needs to tighten up their supply chain,” he said.

When it comes to the actual movement of cargo, the biggest problem for Atlanta-based John S. James Co. is port-of-call alternating by carriers, said corporate export manager Patrick Fosberry, who works at the company’s Charleston, S.C., office. For example, “a vessel might offload the cargo in Norfolk instead of Charleston and just leave the cargo. Sometimes, the number of free (demurrage) days change, and the importers have to make the trucking and clearance arrangements,” he said. The problem does not occur often but is arising with growing frequency, he said.

On the export side, cargo rollovers of a week happen about once a month, and more with larger vessel operators than with smaller ones, Fosberry said.

Yennie said carriers are “in general, very good” at moving cargo, “but then again, volumes are very low.” When cargo volumes start to rebound, shipment rollovers are likely to increase, he said. Carriers are not going to add ships “until it makes more sense from the fiduciary angle,” he said.

Under the weather
One factor beyond the carriers’ control is weather, he said. Containers get washed over in rough seas, and severe storms force vessels to take circuitous routes and, at times, switch ports, he said. But shipping lines do their best to minimize the blow to the beneficial cargo owners, he said. Recently, a ship had to dock at Houston instead of New Orleans, and the carrier arranged at its own expense to get the cargo moved over land to the latter city, he said.

However, “more times than not, a carrier will claim force majeure an act of nature and will leave it up to you to get your cargo,” he said.

Impending space squeeze = higher rates
Frank Hercksen, senior vice president of sea freight for North America at Kuehne & Nagel, Inc., echoed Yennie’s comment on the likelihood of shipment rollovers. Maersk, CMA-CGM and Mediterranean Shipping Co. have reduced the capacity in their joint trans-Pacific service by the equivalent of 8,500 20-foot containers (TEUs); and the CHKY Alliance comprising Cho Yang, Kawasaki Kisen Kaisha and Yang Ming Marine Line has trimmed 1,500 TEUs of capacity, Hercksen said. “Between them, that’s 10,000 TEUs a week or more than a half-million TEUs a year,” he said. K&N is based in Schindellegi, Switzerland, and its North American headquarters is in Linthicum, Md.

The resulting space squeeze will drive rates back up, he said, adding, “In the trans-Atlantic, we’re seeing similar activities. And the big driver for carriers right now is Asia-Europe. There are severe issues in terms of servicing that market; that’s where the carriers are getting the confidence that they can increase their rates. There’s more cargo than capacity.”

But shippers “have to come to terms with the fact that rates must go up” if they want reliable service and current, accurate information, Hercksen said. Shipping lines need to operate profitably, and if they are driven out of business, “that cannot be good for anybody.”

Mixed reviews on customer service
Carriers got mixed reviews on customer service. When having to reach a carrier by phone, “usually, we get someone who can handle the problem,” said John Abisch, president of Econocaribe Consolidators, a non-vessel-operating common carrier based in
Miami. Shipping lines have pared their customer service staffs, increasing reliance on their Web sites for information, he said.
Clarke said his company has had problems dealing with carriers by phone, saying customer service representatives are not knowledgeable about logistics, and it can be difficult to reach logistics departments. “We get better responses by e-mail,” he said.
But vessel operators aren’t entirely at fault, he said. “These are very trying times. … When you’re losing money, it’s hard to give
extra service.”

Pittillo said all the carriers have improved on phone hold times, and online tracking and tracing of shipments “has been a
life-saver, allowing us to provide quick, knowledgeable information to the exporters as well as educating ourselves on the entire movement of cargo.”

In This Issue

Up Front

News, Trends & Analysis
New Items

The risks of delayed action

Supply Chain
Is your service provider compliant?

Does that belong in my port?

Features
Grading the carriers: How are your service providers doing?

Gateway at a glance: China

Ports & infrastructure
Port Productivity Tools: Six success stories

U.S. ports downsize staffs in new economy

Port Products
RTGs and reach stackers

Commentary
What’s on the horizon?

On the Horizon
Fleets of the future: The Chameleon

Casualties