Guest Post: Robert Garrison, President of Global at NFI
When importers are booking their freight, two main concerns come to mind: cost and timeliness. With the new alliance route updates, it is a great time for shippers to reassess cost and time requirements. This year, carriers have adapted their routes to accommodate for larger vessels and reduced transit times to key gateway cities. These larger vessels are met with increased docking requirements, more port and terminal planning, and require more communication between transportation modes. Similarly the focus on key gateways requires additional planning for final mile deliveries. Utilizing a global 3PL can help navigate the transition and find the optimal solutions for supply chains. There are several key factors to consider relative to timeliness and cost in order to optimize networks.
Factors to Consider for Time
#1 – Determining a Reliable Route
In general, the most reliable routes tend to be the most direct. For example, if a ship is sailing from Shanghai, China to New York, New York then next to Baltimore, Maryland and Savannah, Georgia, the reliability can decrease with each additional stop due to terminal delays, weather, or unexpected events such as container shortages. If possible, plan routes in the most direct manner. For example, if the ultimate destination is Atlanta, Georgia and the shipper wants to use the Port of Savannah, they should find a service with Savannah as the first port of call.
If they are shipping to the East Coast from Asia, they may also want to consider which canal the carrier utilizes on the trip over. The Suez has historically been considered the most reliable and capable of supporting larger vessels; however, with the recent Panama expansion shippers can now consider both options opening up the number of direct options available.
#2. Calculating The Fastest Route
The second consideration is the fastest route. To calculate the fastest route, target a carrier that has the target origin as their last port of call leaving Asia, and the destination as their first port of call entering the U.S. In the example below, the AAE3 service has Shanghai as the final call from Asia and New York as the first port of call in the U.S. so this service will provide the fastest service if those are targeted port pairs.
#3. Port Efficiency
The third component of carrier reliability is port efficiency. Not all ports are created equal. The most efficient ports combine a host of productivity improvements to make sure that cargo gets off the vessel and out the gate as quickly as possible. The first step is how quickly the cranes can get the vessels unloaded. Next, how quickly they are made available for pickup. Lastly how efficient the port is in getting truckers in and out of the terminal. It is important to ask for statistics on all three areas to make sure the chosen port gets cargo moving quickly.
Keeping Cost in Mind
Cost is also a huge deciding factor when booking ocean carriers. The three biggest factors impacting cost are leverage, supply and demand, and routing.
When it comes to shipping cost, one can assume that the more a shipper spends, the lower its costs. If a shipper’s individual volume is low, there are ways to pool its volume to create the same effect. Leverage the volume and frequency of shipping to negotiate and compare costs.
#2. Supply and Demand
Ocean shipping is a true economic model in that when supply is high and demand low prices decline and vice versa. Understanding these peaks and valleys is critical to achieving the lowest cost. Shippers can consult with their 3PL to gain better insight into the market.
How freight is routed has a major impact on cost. For example, if a shipment is going to New York from Asia it is much less expensive to stay on the boat via a canal versus shipping to the West Coast and utilizing rail or trucking solutions. Shippers can also explore slower or non-direct routes to gain an advantage. Another technique is to find backhaul opportunities. For example, a carrier may offer better rates to Dallas, Texas if it has a surplus of export opportunities there that need equipment supply.
Depending on the product and the needs of the importer, there are many options with which carriers to choose on which route to ship on and many factors to consider. Working with a 3PL can benefit shippers by recognizing the changing industry requirements due to the alliances and balance that against the needs of the importer. They can also ensure that shippers stay informed and up to date on the latest shipment routes to optimize their supply chain.
Joining NFI in 2013, Rob is in charge of NFI’s Global division. Rob continues to discover ways to build and optimize supply chains in today’s global market to achieve competitive advantages.