Thursday, July 24, 2014
Drewry: As cost cutting ramps up, reliability slips
As ocean carriers concentrate more on cutting costs to improve the bottom line, service quality is suffering, according to the latest Logistics Executive Briefing from Drewry Supply Chain Advisors.
Containership reliability dropped for the fifth straight quarter in Q1 of 2013 with the on-time average slipping to just 61 percent, according to Drewry researchers.
The report noted that unusually bad weather in Asia and Europe contributed to the slump, but that it also indicates a decline in the carriers’ network operations.
Delays are causing major productivity issues for ports, which can’t plan when ships will arrive, the analysts said. Bottlenecks arise, with dwell times up and storage capacity down.
Operational inefficiencies add cost to carriers, Drewry says, which have to stay longer at ports to handle customer complaints.
The supply chain experts say it is in the lines’ best interests to maintain service reliability, but the opposite seems to be happening. Drewry says carriers may not have sped up to get back on schedule for cost reasons, and that although shippers can live with longer planned transit times, they will not long tolerate more delays tacked on to the longer transit times.
Drewry says the trend is cemented by the worsening performance of Maersk Line, which have been standouts in terms of reliability and used to have an on-time target of 95 percent. Maersk experienced a steep quarter-over-quarter decline of 10 percent in the first quarter of 2014 to 70 percent—still above the industry average but down from their average mid-80 percent scores seen in the last two years.
The analysts say Maersk performance suffered, in part, due to its service partners’ ships, which had poorer reliability records. They said Maersk’s own operated ships had reliability average of 82 percent, second only to Hamburg Süd ships (91 percent). Drewry notes this may be bad news for Maersk as it continues to pursue vessel sharing with other carriers.
In conclusion, Drewry expects carriers to continue to emphasize cost cutting measures to keep freight rates low, and therefore reliability will continue to suffer.
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