BDP study cites myriad challenges shippers experience from ‘slow steaming’
June 06, 2011 - LM Editorial
While the practice of “slow steaming” by ocean carriers has become more commonplace in an effort to reduce fuel costs, shippers are not necessarily enthused about its subsequent effects on their supply chains.
This was a major finding in a new study comprised of feedback from 290 shippers conducted by third-party logistics services provider BDP International in conjunction with Centrix, BDP’s consulting unit, and Saint Joseph’s University. Shippers surveyed in this study were in the chemical, consumer goods, retail, and healthcare sectors, with 73 percent involved in import and export activity, 15 percent in export-only and 12 percent in import-only.
Among the reasons shippers gave for this had to do with the fact that slow steaming results in extended transit times that require more comprehensive advance planning of shipments, and increased inventory levels and adjust production schedules. And they added that increases in time distribution network bring about additional costs.
And while ocean carriers are utilizing slow-steaming to save money, a sizable majority—70 percent—of shippers indicated that carriers need to reduce freight rates as they pertain to the cost-savings of slow steaming in the form of a business environment more amendable to negotiating mutually favorable rates.
What’s more the survey found that 50 percent of shippers said the economic and environmental benefits of slow steaming are worth the costs and inconvenience to them and their customers, with 40 percent saying they are not worth it, and ten percent with no opinion.
“Shippers want to be heard,” said Arnie Bornstein, BDP Executive Director, Marketing & Corporate Communications, in an interview. “They want carriers to treat them like customers. Not by a direct pass-through of the savings carriers are enjoying from slow steaming, but through more collaborative rate negotiation and improved customer service. A common denominator of a mutually amenable rate environment for shippers and carriers resides in comprehensive histories of performance data. Visibility, maneuverability and sense of partnership that comes with a dialog of mutually balanced risk and reward. But old paradigms die hard.”
Bornstein added that slow steaming is one of numerous challenges—or pain points—
shippers, receivers, carriers, ports, warehouses, logistics service providers, and others conducting international trade are experiencing in the wake of the financial crisis and recession of 2008/2009.”
Among the impact areas slow steaming has had on supply chains, the primary ones identified in the study were: inventory levels (52 percent); customer service (50 percent); production scheduling (45 percent); cash flow (31 percent); competitive position (26 percent); and freight rates (16 percent).
When asked about the impact of slow steaming on inventory levels and customer service, Bornstein said that while carriers’ preoccupation with managing assets is understandable, they are in business to serve customers, and earn a fair profit, adding that happy customers create loyalty, enduring relationships and profitable business—and unhappy customers eventually find a better way.
“For shippers everywhere the performance bar is higher for better advance load forecasting and planning,” he said. Our customers tell us they want to achieve central control connecting far-flung business units to improve global shipment visibility and optimize logistics and transportation spend. They tell us they need to see upstream in near real-time how their suppliers are performing. Not just to track and trace the status, but to manage by exception and receive customized performance metrics of vendors, carriers, logistics providers and even themselves. They tell us the recession and financial crisis brought into sharp focus the realization supply chain management is increasingly under the spotlight of financial leadership who want more creative solutions to sustainable cost savings.”
Slow steaming has been under scrutiny in recent weeks, as evidenced in an April a request for comments from the Federal Maritime Commission on the effect of slow steaming on U.S. ocean liner commerce, most shippers found little or no rate or service benefit.
According to the National Industrial Transportation League (NITL), supply chains have suffered negative impacts as a result of slow steaming. Shippers said that transit times have risen, effective vessel capacity has dropped, shortages in containers and equipment have been exacerbated, and meeting customer expectations is more difficult.
“One of the key aspects of the supply chain is that transit times affects inventory,” said the NITL. “Initially, slow steaming accelerated the depletion of inventory making it harder for shippers to fill their store shelves and manufacturers’ production lines in a timely manner.”
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