National Retail Federation Shares Views on Ocean Cargo Supply Chain

Editor’s note: This article originally appeared in Supply Chain Management Review.

Just how disruptive was the SOLAS VGM amendment to global shippers? Was the Panama Canal expansion indeed the game changer it was meant to be? And have container carriers finally come up with a strategy to restore rates while still providing their promised standards of service? In an exclusive interview, Jonathan Gold, vice president, supply chain and customs policy for the National Retail Federation shares his views and forecasts

Supply Chain Management Review: Despite many concerns, the implementation of the SOLAS VGM amendment seems to have been implemented without too many disruptions in service. Does this demonstrate a new level of efficiency and cooperation in global shipping?

Jon Gold: The concerns about potential disruption from VGM implementation was rightly justified.  There was a great deal of misinformation and lack of information about how the requirement would be implemented across the globe.  Still today a majority of IMO member nations have not issued their guidance or regulations.  For those that have, there is a lack of harmonization.

SCMR: What are supply chain managers telling you?

Gold: We were continually hearing from our members about the lack of information from carriers about the basics of how and when the VGM had to be submitted.  This was certainly not the model for how global regulations should be rolled out.  Implementation plans should have started when the IMO adopted the new requirement in 2014.  Clear guidance and regulations should have been developed then as well.  Better coordination, collaboration and communication was needed throughout the process.

SCMR: Cyber security in the ocean cargo supply chain now appears gaining traction as a concern. Just how serious is it, and what steps can shippers take to address it?

Gold: Cyber security is an issue not just for the supply chain, but for businesses in general.  Our members are taking the issue of cyber security and data breach extremely seriously.  They are working to protect their systems from intrusion while also making sure their vendors and partners have protections in place as well. 

SCMR: While ocean cargo carriers continue to consolidate, do you finally see an end to this trend by 2017?

Gold: It is unclear that consolidation will end in 2017.  The trend may continue until carriers find a way to start turning a profit.

SCMR: Carriers also impose a number of surcharges to bring rates up to a sustainable level. Would shippers be better off just giving in a bit more during contract negotiations?

Gold: Shippers are willing to pay more for improved service.  Unfortunately, it seems as if the carriers are only focusing on maintaining market share by offering the lowest price possible.  A healthy carrier industry is critical to the success of shippers and the global supply chain.

SCMR: It also looks like slow steaming is here to stay. Is that a good thing?

Gold: It’s unclear if slow steaming is a good thing or not.  With lower fuel prices and more fuel efficient ships, is this a trend that needs to continue?  If the savings can be used to help improved overall service, that it should continue.

SCMR: Some carriers are re-thinking their “mega ship” strategies. Will see a reversal in this trend? What sized vessel makes the most sense on the major trade lanes?

Gold: I don’t know if there is a vessel size that makes the most sense for major trade lanes. However, there needs to be better coordination between carriers, ports, marine terminal operators and others in the supply chain to ensure larger ships can actually be handled at the ports.  Larger vessels are one of the issues that is continuously cited as a cause of port congestion.  Better planning and coordination is needed to ensure vessels can be worked as efficiently as possible without causing congestion and backups at ports.

SCMR: Finally, just how great an impact has the expanded Panama Canal made? Was it much ado about nothing or a real game changer?

Gold: It’s going to take some time to see the full impact of the expanded Panama Canal.  Shippers were not going to rush in right away to change their supply chains until there was confidence about a shift through the canal.  This not only includes the rates, routes and fees, but also the readiness of East Coast ports to handle the larger vessels.

Follow Jon Gold on Twitter @JonGoldDC