Supply Chain Managers Ready Themselves for New Ocean Cargo Carrier Alliances

Analysts with CargoSmart Limited – a global management software provider serving the logistics community – have determined from “proforma” schedules provided by the new alliances that service disruptions should be manageable through Peak Season.

“For ports that are accommodating larger vessels, there may need to be greater adjustments in berth windows for the greater volume of cargo, says Lionel Louie, CargoSmart’s chief commercial officer. “We may see initial frequent updates to carriers’ sailing schedules as the alliances deploy the ships on the new services.”

Louie adds that most of the major U.S. ports will have fewer visiting vessels for each alliance service. In addition, the average vessel size by twenty-foot equivalent unit (TEU) capacity for the alliance services will increase at most of the Top 30.

“With the expected number of alliance vessels on the trans-Pacific and trans-Atlantic trades visiting the these ports decreasing by 17% and the average alliance vessel capacity increasing by 5%, we anticipate that the new alliance services will be operating overall less capacity at the top ports,” says Louie.

At the individual port level, those that are expected to have more visiting vessels and with a greater average TEU capacity could experience an initial impact on operations as they adjust to the possible new volumes, Louie cautions.

Executives at Navis – a Cargotech company specializing in software solutions for port terminals – comes to the same conclusion.

“There’s going to be a need for more terminal software optimization and training for sure, says Raj Gupta, Chief Technology Officer for Navis. “We can see that the complexity of the ocean cargo supply chain is placing new pressures on landside operations and yard management of containers.

This in turn, creates problems for logistics managers who might not have complete control of port terminal preference. Analysts for the London-based maritime consultancy, Drewry, note in their latest Ports and Terminals Insight report that new alliances have thrown a new wrinkle into the situation.

“Our analysis shows that even when a shipping line has a significant stake in a terminal, this doesn’t necessarily mean that the port is selected for the network schedule,” says Neil Davidson, Drewry’s senior analyst for ports and terminals. He observes that the picture is “very” varied: in some cases the correlation is tight, in others there is no obvious logic at all.

“Carriers have to bear in mind the preferences of shippers for major ports, but we were surprised that carriers have not paid much attention to the transhipment hub…which is entirely within their control.”

Furthermore, this analysis shows that individual lines are not entirely in control of their own destinies when it comes to port choices, as partner lines in their alliances may have conflicting port choice preferences and particular “idiosyncrasies,” Davidson maintains.

“Even if alliance partners have corresponding port preferences, there is still potential for conflict at the terminal level if more than one line in an alliance has interests in different terminals in the same port,” he says.

Davidson adds that the “horse-trading” between alliance members extends beyond port choices and into the choice of specific terminals within any given ocean cargo gateway:

“This illustrates the fact that even if a terminal operator brings in a shipping line as a joint venture partner, there is no absolute guarantee of securing an alliance’s volume.”