Historically, the commodities contained within ocean containers moving along the world’s seaways usually involved heavier, lower-value commodities, such as unfinished goods or raw materials. But given the turbulent state of the
current economic environment, those
trends have shifted and logistics shoppers
have become more willing to look past the
world’s highways, railways and airways to
move their higher value goods.
“Since cost increasingly seems to be dictating customers’ transportation expenditures, the longer transit times involved with
ocean freight, which were once very much
ballyhooed, have suddenly developed a
greater appeal based on the affordability
and significant cost savings that are linked
to ocean transport,” says Kevin Krause, director of ocean services for AIT Worldwide
Logistics, Inc. “In opting to ‘slow boat’ their
commodities, so to speak, customers can
potentially save hundreds of dollars.”
Smart Business sat down with Krause to
discuss how the ocean freight-forwarding
industry and its customers have adapted to
skyrocketing fuel costs, reduced cargo
capacity and transportation restrictions as
a result of this month’s upcoming Olympics
in Beijing.
What are some of the pivotal concerns faced
by the ocean industry?
Today’s ocean industry is currently being
barraged with multiple concerns. The higher cost of fuel, simultaneously matched
with smaller ships being deployed into the
U.S. market, creates severe reductions in
cargo space for U.S. exports. Every day,
we’re fighting tooth and nail for that limited space and equipment.
In addressing these supply chain headaches, urging customers to plan early in
forecasting their demands and scheduling
their bookings at least 10 days ahead of
time is critically important. Taking this initiative gives forwarders ample time to
reach out to multiple carriers, find several
feasible solutions within their customers’
cost parameters and time constraints,
advise of alternative routings, and design
the most efficient and cost-effective logistics plan for the customer.
Discuss how the industry is increasingly
affected by ‘peak season.’
Our industry is currently experiencing
what I like to call an unprecedented ‘perpetual peak season,’ with U.S. exports in
particular.
In the fall of 2007, the declining dollar
against foreign currencies in Asia and
Europe served as the catalyst for this ‘perpetual peak season,’ where the U.S. export
market began experiencing full vessels on
a weekly basis. Although there is no export
peak season currently being charged by
ocean carriers, additional costs, such as
equipment repositioning or early return
fees, were enacted in order to cover this
‘peak’ in export shipments. Determined by
various factors, including the fluctuating
fuel index or oil price per barrel, these
peak season surcharges have created a ripple effect on the bottom line of what is
being produced and sold in the global consumer marketplace.
In 2008, several ocean carriers began
delaying the start of applying peak season
surcharges into August. This delay has created an artificially sustained spike in shipments, while vessel capacity remains fully
utilized from Asia to the U.S. by importers
who are hoping to ship their goods before
the surcharges apply.
What other ocean supply chain strategies
can be used?
Taking a consultative approach in communicating with your customers and maintaining ocean contracts with established
carriers and co-loaders is of critical importance in maximizing service reliability and
minimizing losses among your customer
base.
Educating and informing your customers
on various transit times, schedules and
intermodal transport options and providing all-inclusive visibility is also a crucial
supply chain strategy. Keeping them well
versed in regards to spikes in import volumes or backlogs on export vessels allows
them to prebook at origin in an accurate
and timely manner, ensuring container
equipment availability.
For example, Aug. 8 is the start of the
Summer Games to be held in Beijing and
surrounding areas through Aug. 24.
Beginning in July, ocean carriers and local
government bodies began enforcing
restrictions in order to improve the air
quality in the city and surrounding areas in
preparation for the games. Keeping your
customers abreast of these restrictions and
advising them on suppliers in alternative
locations until these restrictions are lifted
is a crucial supply chain strategy.
Lastly, maintaining partnerships with
established ocean carriers allows providers to offer customers exclusive pricing
points and service options. The benefits of
these relationships not only include competitive cutoffs and enhanced access to
equipment and space availability, but forwarders are given more freedom to be creative and flexible in crafting logistics plans
for their customers, especially if time-sensitive cargo is involved.
KEVIN KRAUSE is director of ocean services for AIT Worldwide Logistics, Inc., headquartered in Itasca, Ill. Spanning numerous nationwide locations and an ever-increasing network of international partnerships, the global transportation and logistics provider delivers tailored solutions for a wide variety of vertical markets and industries. Reach him at www.aitworldwide.com or (800) 669-4AIT (4248).
