Smooth Sailing: Managing Ocean Transport by Lane
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By Rachel Gecker
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Are your ocean shipments moving via the most efficient and cost-effective method? The type of goods, time of year, and ultimate destination of your cargo are just some factors to consider when contracting with ocean carriers. Here, a best-practices guide for managing ocean shipments and ensuring cargo arrives on time, intact, and under budget.
Speed is the name of the game in supply chain management. Shippers want to get cargo to and from the distribution center in the shortest amount of time at the lowest cost possible.
But the most cost-effective shipping method is not always the most obvious.
"We had a shipper moving watermelons from Mexico in refrigerated containers, which are more expensive than dry containers," recalls Mark Miller, director of corporate communications for Oakland, Calif.-based Crowley Maritime Corporation. "Because the melons were moving in the fall and winter, we suggested transporting them in open-top containers with shade cloth stretched across the top. The idea worked and the shipper was able to cut costs."
Whether you ship from the Pacific Rim, Europe, or through the Americas, some knowledge about the factors that affect the cost and speed of your shipments can help you improve efficiency and reduce transportation costs.
Pacific Rim—U.S.
The Trans-Pacific trade (Pacific Rim-U.S.) is mainly dominated by Asia imports and can incur transit times of up to 50 days depending on your business. That may sound like a long time, but many factors—such as weather and the rotation of the ship sailing—combine to affect transit times.
"For shippers moving goods out of Hong Kong to the West Coast, transit times could be as fast as 11 days," notes Tom Craig, president of Glenmoore, Pa.-based consulting firm LTD Management.
"Shipping to the East Coast increases transit times to 25 to 30 days, or upwards of 45 days, for example, coming from a port in Malaysia and going inland to Pittsburgh."
"Cargo on the last port of loading, and unloaded at the first port of discharge, reaps the fastest transit time," says Greg Stangel, vice president of marketing for Intermarine, a New Orleans-based ocean carrier specializing in project and breakbulk cargoes.
"Rarely, however, does a full ship move from one port to another," he notes. "Usually a vessel goes to a port and spends a few days there, which increases the overall transit times."
Also, says Stangel, "In the United States, increased homeland security means that more inspections are taking place in all the ocean lanes. The Coast Guard is stopping more and more vessels for inspections prior to discharge and prior to entering the port itself." Delays related to these inspections can be significant.
Transport buyers looking to cut costs on shipments should also take a look at their cargo's final destination to see if a more economical alternative exists. In each lane, a carrier will generally have a certain number of base ports, and shipments from base port to base port will always be the most economical, says Craig.
In the Trans-Pacific, the carrier usually has three base ports, Hong Kong, Kaohsiung, and Busan in Korea, he adds. An add-on charge will apply when shipping out of a different port.
"The cheapest price in this lane involves shipments coming from Hong Kong to the West Coast, which is a primary port. Shipping to the East Coast will cost more," notes Craig.
Shippers sourcing from Southeast Asia to the East Coast who are looking for an economical answer, however, also have two all-water routes available to them via the Suez Canal and the Panama Canal. The trade-off for the all-water route is lower cost and longer transit times versus traveling via minilandbridge from the West Coast, which permits faster transit at a higher price point.
Europe—U.S.
When shipping from Europe to the United States via the Trans-Atlantic trade lanes, transit times are much shorter than the Trans-Pacific lanes, clocking in at roughly seven to 14 days or more.
While many of the factors that affect speed in these lanes are the same as the Trans-Pacific, Craig notes that the North Atlantic is mainly guided by freight forwarders and Non-Vessel-Operating Common Carriers (NVOs) so the relationship an independent shipper has with a carrier may play a big part in maintaining the efficiency and cost effectiveness of shipments.
"For the most part, this lane is not shipper-dominated," notes Craig. "Europeans are used to dealing with freight forwarders when shipping in these lanes, so pricing and negotiations often depend on who you deal with and how you deal with them."
Though this can be intimidating for the independent shipper, Craig says shipping without a freight forwarder or NVO in this lane can certainly still be done. He advises shippers to ask two questions prior to signing on with a carrier.
"First, if the shipper's strength is the Trans-Pacific trade, he should ask 'What can I give the carrier to increase my value? Can I negotiate an extended contract including both Trans-Pacific and North Atlantic cargo?' By doing this, the shipper may be able to negotiate a contract that is in his best interests as well as the carrier's," says Craig.
The second question the transport buyer should ask is whether or not partnering with a freight forwarder or NVO will be beneficial. Because so many carriers are involved with these service providers, notes Craig, a shipper may want to explore this option to help get his cargo on a ship and get the pricing he needs.
The Americas
The Americas trade lanes include shipments traveling between South America, Central America, the Caribbean, the United States, Canada, and Mexico. Transit times in these markets, however, generally do not have the same demand as in other trade lanes.
Although not as much pressure exists in these lanes as in the Trans-Pacific or Trans-Atlantic lanes, the smaller capacity of the lane works well for certain niche shippers.
The decreased capacity of this lane as compared with the Trans-Pacific for example, can give shippers increased flexibility when shipping via ocean. Carriers who serve this lane can frequently offer shippers more personalized service, depending on demand.
"Though we have regular service," says Stangel of Intermarine, which offers customized voyages for shippers, "we don't run out ships in a purposefully fixed rotation. We construct every voyage based on the demand of cargo for that particular week." This system allows the customer to determine the sailing schedules rather than trying to make a carrier's fixed schedule fit the shipper's needs.
The cost for customized service can sometimes run slightly higher than fixed rotations but does not have to be unaffordable, notes Stangel. The cost for shipping varies depending on the nature of the cargo (shape, size, stackability) as well as the requirements on service. For example, last-in/first-out service will likely cost more than stopover service.
"If a shipper wants fast transit to Argentina, for instance," says Stangel, "normally we stop at Brazil before going to Argentina, which takes additional time. If the shipper wants to bypass Brazil and go directly to Argentina, we can make that happen, but there will be an opportunity cost for this service."
If you want your carrier to customize voyages for your cargo and still remain cost-effective, you should be willing to work with your service provider to plan sailings ahead of time with plenty of notice.
"With more advanced planning, we can work with shippers to customize voyages and provide an economic answer rather than a hardship answer," says Stangel.
The Give and Take
Regardless of the lane in which you will be shipping your cargo, the cost will be affected by the frequency of the shipments that you make with a particular carrier.
"The majority of shippers move their freight with us under confidential contracts, committing to move a certain number of containers or trailers over a period of time at less-than-tariff rates," says Crowley's Miller. "Infrequent shippers, or those who don't move cargo under contract, generally pay the published tariff rates."
Developing a long-term relationship with a carrier is one thing Jeff Carmignani knows the value of first- hand. As vice president of Logan, Utah-based ICON Health and Fitness, the world's largest manufacturer of fitness equipment, Carmignani ships cargo from Asia to the United States, Europe, and South America.
The company also exports out of Utah to northern and southern Europe and to the United Kingdom. ICON's retailers include department stores such as Sears, sporting goods stores such as Sports Authority, and mass merchandisers Wal-Mart, Kmart, and Target.
Carmignani credits his long-time partnership with ocean carrier APL for helping his company manage shipments through all the major ocean trade lanes.
"Transit times are a big issue for us," says Carmignani. "We have run into problems trying to get space on vessels and get containers back during the peak season, which impacts the efficiency of our shipments."
The company previously worked with APL and, believing in the value of long-term relationships, decided to utilize the carrier's services not just for its peak season shipments, but for its year-round business, including shipments during the slack season.
"In order to secure competitive pricing with APL, we negotiated a contract that has the same pricing year-round," says Carmignani.
This partnership allows for give and take among shipper and carrier, an aspect Craig says can make a real difference in negotiating prices and elevating service levels.
"The people at APL have been very cognizant of our needs," says Carmignani. "They work closely with us to make sure we have the number of containers we require and protect space for us on the vessels."
Smooth Sailing: Managing Ocean Transport by Lane
20More Sharing ServicesShare on printShare on emailShare on twitterShare on facebook
By Rachel Gecker
No tags available
Are your ocean shipments moving via the most efficient and cost-effective method? The type of goods, time of year, and ultimate destination of your cargo are just some factors to consider when contracting with ocean carriers. Here, a best-practices guide for managing ocean shipments and ensuring cargo arrives on time, intact, and under budget.
Speed is the name of the game in supply chain management. Shippers want to get cargo to and from the distribution center in the shortest amount of time at the lowest cost possible.
But the most cost-effective shipping method is not always the most obvious.
"We had a shipper moving watermelons from Mexico in refrigerated containers, which are more expensive than dry containers," recalls Mark Miller, director of corporate communications for Oakland, Calif.-based Crowley Maritime Corporation. "Because the melons were moving in the fall and winter, we suggested transporting them in open-top containers with shade cloth stretched across the top. The idea worked and the shipper was able to cut costs."
Whether you ship from the Pacific Rim, Europe, or through the Americas, some knowledge about the factors that affect the cost and speed of your shipments can help you improve efficiency and reduce transportation costs.
Pacific Rim—U.S.
The Trans-Pacific trade (Pacific Rim-U.S.) is mainly dominated by Asia imports and can incur transit times of up to 50 days depending on your business. That may sound like a long time, but many factors—such as weather and the rotation of the ship sailing—combine to affect transit times.
"For shippers moving goods out of Hong Kong to the West Coast, transit times could be as fast as 11 days," notes Tom Craig, president of Glenmoore, Pa.-based consulting firm LTD Management.
"Shipping to the East Coast increases transit times to 25 to 30 days, or upwards of 45 days, for example, coming from a port in Malaysia and going inland to Pittsburgh."
"Cargo on the last port of loading, and unloaded at the first port of discharge, reaps the fastest transit time," says Greg Stangel, vice president of marketing for Intermarine, a New Orleans-based ocean carrier specializing in project and breakbulk cargoes.
"Rarely, however, does a full ship move from one port to another," he notes. "Usually a vessel goes to a port and spends a few days there, which increases the overall transit times."
Also, says Stangel, "In the United States, increased homeland security means that more inspections are taking place in all the ocean lanes. The Coast Guard is stopping more and more vessels for inspections prior to discharge and prior to entering the port itself." Delays related to these inspections can be significant.
Transport buyers looking to cut costs on shipments should also take a look at their cargo's final destination to see if a more economical alternative exists. In each lane, a carrier will generally have a certain number of base ports, and shipments from base port to base port will always be the most economical, says Craig.
In the Trans-Pacific, the carrier usually has three base ports, Hong Kong, Kaohsiung, and Busan in Korea, he adds. An add-on charge will apply when shipping out of a different port.
"The cheapest price in this lane involves shipments coming from Hong Kong to the West Coast, which is a primary port. Shipping to the East Coast will cost more," notes Craig.
Shippers sourcing from Southeast Asia to the East Coast who are looking for an economical answer, however, also have two all-water routes available to them via the Suez Canal and the Panama Canal. The trade-off for the all-water route is lower cost and longer transit times versus traveling via minilandbridge from the West Coast, which permits faster transit at a higher price point.
Europe—U.S.
When shipping from Europe to the United States via the Trans-Atlantic trade lanes, transit times are much shorter than the Trans-Pacific lanes, clocking in at roughly seven to 14 days or more.
While many of the factors that affect speed in these lanes are the same as the Trans-Pacific, Craig notes that the North Atlantic is mainly guided by freight forwarders and Non-Vessel-Operating Common Carriers (NVOs) so the relationship an independent shipper has with a carrier may play a big part in maintaining the efficiency and cost effectiveness of shipments.
"For the most part, this lane is not shipper-dominated," notes Craig. "Europeans are used to dealing with freight forwarders when shipping in these lanes, so pricing and negotiations often depend on who you deal with and how you deal with them."
Though this can be intimidating for the independent shipper, Craig says shipping without a freight forwarder or NVO in this lane can certainly still be done. He advises shippers to ask two questions prior to signing on with a carrier.
"First, if the shipper's strength is the Trans-Pacific trade, he should ask 'What can I give the carrier to increase my value? Can I negotiate an extended contract including both Trans-Pacific and North Atlantic cargo?' By doing this, the shipper may be able to negotiate a contract that is in his best interests as well as the carrier's," says Craig.
The second question the transport buyer should ask is whether or not partnering with a freight forwarder or NVO will be beneficial. Because so many carriers are involved with these service providers, notes Craig, a shipper may want to explore this option to help get his cargo on a ship and get the pricing he needs.
The Americas
The Americas trade lanes include shipments traveling between South America, Central America, the Caribbean, the United States, Canada, and Mexico. Transit times in these markets, however, generally do not have the same demand as in other trade lanes.
Although not as much pressure exists in these lanes as in the Trans-Pacific or Trans-Atlantic lanes, the smaller capacity of the lane works well for certain niche shippers.
The decreased capacity of this lane as compared with the Trans-Pacific for example, can give shippers increased flexibility when shipping via ocean. Carriers who serve this lane can frequently offer shippers more personalized service, depending on demand.
"Though we have regular service," says Stangel of Intermarine, which offers customized voyages for shippers, "we don't run out ships in a purposefully fixed rotation. We construct every voyage based on the demand of cargo for that particular week." This system allows the customer to determine the sailing schedules rather than trying to make a carrier's fixed schedule fit the shipper's needs.
The cost for customized service can sometimes run slightly higher than fixed rotations but does not have to be unaffordable, notes Stangel. The cost for shipping varies depending on the nature of the cargo (shape, size, stackability) as well as the requirements on service. For example, last-in/first-out service will likely cost more than stopover service.
"If a shipper wants fast transit to Argentina, for instance," says Stangel, "normally we stop at Brazil before going to Argentina, which takes additional time. If the shipper wants to bypass Brazil and go directly to Argentina, we can make that happen, but there will be an opportunity cost for this service."
If you want your carrier to customize voyages for your cargo and still remain cost-effective, you should be willing to work with your service provider to plan sailings ahead of time with plenty of notice.
"With more advanced planning, we can work with shippers to customize voyages and provide an economic answer rather than a hardship answer," says Stangel.
The Give and Take
Regardless of the lane in which you will be shipping your cargo, the cost will be affected by the frequency of the shipments that you make with a particular carrier.
"The majority of shippers move their freight with us under confidential contracts, committing to move a certain number of containers or trailers over a period of time at less-than-tariff rates," says Crowley's Miller. "Infrequent shippers, or those who don't move cargo under contract, generally pay the published tariff rates."
Developing a long-term relationship with a carrier is one thing Jeff Carmignani knows the value of first- hand. As vice president of Logan, Utah-based ICON Health and Fitness, the world's largest manufacturer of fitness equipment, Carmignani ships cargo from Asia to the United States, Europe, and South America.
The company also exports out of Utah to northern and southern Europe and to the United Kingdom. ICON's retailers include department stores such as Sears, sporting goods stores such as Sports Authority, and mass merchandisers Wal-Mart, Kmart, and Target.
Carmignani credits his long-time partnership with ocean carrier APL for helping his company manage shipments through all the major ocean trade lanes.
"Transit times are a big issue for us," says Carmignani. "We have run into problems trying to get space on vessels and get containers back during the peak season, which impacts the efficiency of our shipments."
The company previously worked with APL and, believing in the value of long-term relationships, decided to utilize the carrier's services not just for its peak season shipments, but for its year-round business, including shipments during the slack season.
"In order to secure competitive pricing with APL, we negotiated a contract that has the same pricing year-round," says Carmignani.
This partnership allows for give and take among shipper and carrier, an aspect Craig says can make a real difference in negotiating prices and elevating service levels.
"The people at APL have been very cognizant of our needs," says Carmignani. "They work closely with us to make sure we have the number of containers we require and protect space for us on the vessels."
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