Hanjin-related supply chain struggles spelled out in letter to Labor Secretary
The letter explained that with U.S. businesses relying on supply chain predictability during the busiest time of year, Hanjin’s bankruptcy filing has caused widespread disruption in freight shipments worldwide.
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Concerns related to the recent bankruptcy filing by Hanjin Shipping continue to put a wrench in supply chain planning and operations for all types of shippers.
Since Korea-based Hanjin Shipping, the seventh largest ocean liner in the world that handles roughly 7% of U.S.-Asia cargo, filed for bankruptcy on August 31, shippers that had been moving freight with Hanjin have been dealing with myriad disruptions.
That was evident in a letter to U.S. Department of Commerce Secretary Penny Pritzker penned by 120 organizations comprised of manufacturers, farmers and agribusinesses, wholesalers, retailers, importers, exporters, distributors, and transportation and logistics providers.
The letter explained that with U.S. businesses relying on supply chain predictability during the busiest time of year, Hanjin’s bankruptcy filing has caused widespread disruption in freight shipments worldwide. And it urged her to continue to work with the South Korean government to bring about a swift and economically beneficial resolution that will allow cargo to move through the global supply chain and giver certainty to U.S. businesses.
“Since this is ongoing, the level of anxiety remains high as shippers wonder when Hanjin ships will be allowed to enter ports and if their goods will be seized by Hanjin’s creditors once they are docked,” the letter stated. “There are also concerns about critical cargo that remains at overseas ports. For some, there is added confusion about the location of cargo, where cargo will be unloaded and how the cargo will be transported. The trade community is also facing steadily increasing freight charges as they look for new transportation options as well as concerns about fees assessed on cargo. The impact on small and medium sized companies could be particularly devastating if this situation is not resolved in a timely manner.”
National Retail Federation Vice President, Supply Chain and Customs Policy Jon Gold said at last week’s FTR Transportation Conference that his organization’s members are extremely frustrated by the Hanjin situation as they try to figure out how best to get their cargo at the busiest time of the year for retail shippers, with cargo moving in preparation for the fall shipping season and the holidays.
“It is very problematic for all involved stakeholders,” he said. “There are three buckets, in a sense, when it comes to Hanjin’s cargo. One is that it’s in U.S. ports, another is it is sitting on a Hanjin vessel out at sea somewhere, and there is cargo still overseas at the point of origin. And now shippers are being forced to pay terminal operators again to get cargo off of vessels they already paid for. Issues like this are popping up, and it is not just issues for getting cargo off of vessels. There are these ripple effect issues that related to equipment that we are going to start seeing. The fact that terminal operators won’t take back empties is a huge problem as it relates to a shortage of chassis as not many terminal operators will take Hanjin containers.It is not the fault of the shipper or trucker that they cannot get equipment back to a port, yet they are being charged. This is going to be a long-term issue.”
From a capacity perspective, should Hanjin exit the market for good, it is not likely to have a major impact on the excess capacity situation that ocean cargo market has been in over the last several years, according to Ben Hackett, founder of maritime consultancy Hackett Associates.
The reason for this, he explained, is that their global share is relatively small, while there is a bigger problem for Korean shippers who favor Korean carriers, with Hyundai Merchant Marine benefiting, as they are already introducing extra ships to carry Hanjin cargo.
In terms of rates, Hackett explained that other carriers will try to take advantage of Hanjin’s problems and raise rates to those shippers looking for another way to move their goods, as in the case of COSCO raising rates. But Hackett said that will be a short-term thing that is focused primarily on Hanjin customers.
And for shippers that relied heavily on Hanjin and the subsequent impact on their supply chains, the trickle-down effects become a very challenging process in many respects, explained Joe Dunlap, Managing Director of Supply Chain Services for industrial real estate firm CBRE.
“It is creating is a situation in which they are having to reassess freight alternatives, because capacity in that segment of the industry is going to tighten up and they are looking at how to make sure they are not impacted through the holiday importing season and make sure they are booking space with other carriers,” he said. “If a shipper already has a contract and is ‘handcuffed’ with Hanjin now, it needs to be getting a new agreement set up with another carrier or alliance.
Longer-term, Dunlap said one needs to recognize that for companies that were not impacted, with the long-term effects not only of a potential rate increase from capacity tightening, like what happened to Hanjin, it is a reminder to diversify or have backup plans to redirect when needed so this does not happen to them. But he noted it also deleverages their position of power in negotiating rates, as there are a few negatives that are going to impact a lot of people on the rate increase side due to capacity and diversifying their freight carriers.
About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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