National Retail Federation takes long view on global ocean cargo carrier issues

A number of NRF members have said that carrier financial stability, schedule integrity, chassis and port congestion are some of the most critical issues facing the carriers.

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Editor’s Note: As news surfaced here and in the mainstream business press about more ocean carrier consolidation being proposed, shippers may be curious about the stability of “brands” in the marketplace. This question and others were recently posed to Jonathan Gold, vice president, supply chain and customs policy for the National Retail Federation. In this exclusive LM interview, he addresses that issue and other concerns shippers may have about this transport sector in the future.

Logistics Management: CMA CGM and Maersk Line say they’ll maintain independent brands in companies they may acquire. Is this a good idea? What does it mean to shippers?  

Jonathan Gold: We certainly think maintaining the independent brands is a good thing, especially for shippers.  This allows for the brands to remain more nimble and able to provide more personalized services.  It also allows for them to rely on the larger parent company for cost savings and financial support, as well as offer services that might not have been previously available.  We think it can benefit shippers, but at the end of the day, it all depends on how the acquisition works out and how much independence is granted to the brands that are acquired.

LM: 2M Transpacific is cutting back on service, blaming overcapacity in the trade. Does this signal a trend for other carrier consortia? 

Gold: We don’t think it signals a trend.  We think this comes down to the need for carriers to better manage capacity and utilization.  I know this is easier said than done and has been an issue plaguing the industry for years.  However, in today’s 21stcentury supply chain, it is an integral issue that needs to be resolved.

LM: Ports in the U.S. Southeast seem to have found a way of pooling chassis more efficiently than elsewhere in the country. Will this have an impact on carrier deployment schedules?

Gold: We are glad the ports in the Southeast are finding solutions for chassis pools.  This has been an ongoing challenge for the industry.  It is unclear at this point if it will change carrier deployment schedules. We certainly encourage other ports to look at what has been done in the Southeast to see if it is a model that could work at their ports.

LM: What about the port labor picture? Are ports on the East Coast and Gulf providing more security for shippers by getting an early start on labor management issues?

Gold: We applaud the International Longshoreman’s Association and the United States Maritime Alliance for coming to an agreement on a contract extension well in advance of the current contract expiring. While the contract still has to be ratified by both parties, retailers welcome the certainty of labor stability at the East Coast/Gulf Coast as well as the West Coast.  Retailers can now spend their time developing new markets and improving their supply chains instead of having to worry about developing risk mitigation and contingency planning, especially during the peak season which is the most critical time for the retail industry.  

LM: So you may believe this is a model that labor and management should follow for years to come?

Gold: Indeed, we do. They should sit down early to work on negotiating new contracts and not wait until just before the contract expires.  The economic impacts from the disruptions resulting from previous negotiations cannot be repeated again.  Parties should always remain at the table and commerce should continue to flow.

LM: Many shippers were surprised by bunker fuel surcharges this season. Does this suggest that carriers will return to Cartel pricing?

Gold: We hope that is not the case.  In talking with NRF members, most if not all have refused to pay to surcharges this season.

LM: Third parties like INTTRA, CargoSmart, and GT Nexus insist that carriers are becoming more networked with information technology. What is your take on this development? Have all carriers bought into these models or are they pursuing independent systems?

Gold: We think it is incredibly important for carriers to invest in more information technology that will help drive more transparency into the supply chain.  This has to be the case for all of the stakeholders, including the marine terminal operators.  The transparency will only help drive the efficiency through the supply chain that retailers and other beneficial cargo owners are looking for.

LM: So it sound like you still have concerns?

Gold: Yes. As we’ve seen recently, some are pushing their own systems with no interoperability between them.  This isn’t always the best case as you are trying to drive system wide efficiency.  When you are operating in an environment where you have multiple terminals all operating their own systems, such as in the Ports of LA/Long Beach, that can make it more difficult and lead to less efficiency.

LM: Blockchain is another much heralded development. How much of it is real?

Gold: I think it’s too early to judge blockchain. There are certainly a number of companies who are in the stages of conducting different pilot projects to determine and evaluate its role in the supply chain.  There are even some government agencies looking at how it can be deployed for trade enforcement purposes.  We continue to watch closely all of the developments, especially the eventual development of potential rules and regulations that could affect the technology moving forwards.

LM: Air cargo has been taking some share away from ocean carriers with high value and time sensitive products. Is this going to continue? Do you regard this as a good risk mitigation strategy?

Gold: I think the use of air cargo will continue to grow, especially as e-commerce continues to grow.  With customers expecting next-day deliveries, it will certainly continue to be a mitigation strategy to ensure that products are delivered to meet the customer expectation.  I think this also depends on the product being sold by the retailer and whether it makes sense to use air or not.  

LM: Finally, what is the most critical issue facing ocean carriers for the remainder of this year? How do they address the most urgent shipper needs?

Gold: Obviously, the biggest issue facing all of industry right now is the continued escalation of the trade war and the impact that will have on both imports and exports.  Beyond that, a number of our members have said that carrier financial stability, schedule integrity, chassis and port congestion are some of the most critical issues facing the carriers.  These issues aren’t limited to affecting the industry this year alone. They are systemic issues that are at the core of an efficient supply chain.  For a shipper, especially NRF’s members, their most urgent need is the ability to get their cargo as soon as it is available.  Solving these larger issues will help create a more efficient supply chain that benefits all stakeholders.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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