SHIPPERS URGED TO MAKE PEACE WITH LINES TO RESTORE ORDER TO SUPPLY CHAINS

The relationships between ‘arrogant’ container lines and their retailer, manufacturer and other shipper customers must be repaired if supply chain efficiency is to be restored after the chaos of the Covid years, according to leading freight and shipping experts.

Speaking on episode 2 of The Freight Buyers’ Club podcast, produced with the support of Dimerco Express Group, Jensen told host Mike King that shippers must work closely with container lines if they want to deliver on their own promises to customers and avoid further disruption in the future.

Bjorn Vang Jensen, Executive Director, International Transport at Cummins, and formerly Global Head of Logistics at Electrolux and VP Advisory Services at Sea-Intelligence consultancy, said logistics and freight procurement officers would, understandably, find it difficult to “forget and move on.”

But he urged them to do exactly that, despite “the mind-blowing arrogance that almost every single carrier displayed toward shippers as they broke their promises” over the last two years when BCOs (Beneficial Cargo Owners) suffered a perfect storm of historically high freight rates, rolled cargo, customer service failures and the worst global liner schedule reliability ever seen.

As an operator, yes, you're tasked with saving money, but you are mostly tasked with generating or creating supply chain systems and networks and platforms that can stand the test of time. We're in an industry with short cycles and long memories. Never forget there will come a time when you're no longer in the driver's seat. Get that PTSD, and that vengeance, and that thirst for revenge out of the system, and then move on and revert to being reasonable. It will stand you in good stead.

Jon Gold, VP for Supply Chain and Customs Policy at the National Retail Federation, also called on shippers to be measured in their approach to container lines. One of the biggest lessons coming out of the pandemic is the need for better collaboration and better partnerships.

He called on retailers and other shippers intent on setting up more resilient chains or diversifying sourcing of product away from China to explain their new strategies to carriers to enable them to plan ahead.

This is where you’ve got to have the carrier talking to their clients to understand what these new [trade] patterns are, he added.

Advice on ocean contract negotiations

Jensen advised shippers negotiating contracts with container lines that, while no size fits all, a mix of contract lengths and multiple ocean freight partners was a prudent strategy as freight rates fell.

If you're an SME or a medium or small shipper, I think you would do well to have a good mix of forwarder and direct carrier contracts right now. That was not a strategy that I have ever pursued [before], but I am pursuing it now. Rather than going back to a carrier every month going, ‘The rate just dropped by another 50%, can I have it?’ you can achieve that by having monthly rate adjustments with a forwarder for part of the volume, and then with the carrier you can have different rate adjustments.

Suitable options, he suggested, might include using an index-linked contract or reviewing terms every three months.

Shippers, beware what you wish for

After Maersk and MSC announced they would dissolve the 2M Alliance, Jensen also scotched talk that a break-up of the alliance system could deliver lower costs and more competition for shippers.

He said the make-up of alliances had evolved many times previously and would do so again. They “will not go away”, he added, because operating a full network is very difficult for any single carrier and the alliance system enables lines to optimise capacity, which also works to the advantage of shippers.

I've never understood those shippers who feel like alliances are evil and, market manipulating and all the other nonsense. If people really want to see trouble in the global supply chain, by all means, get rid of the alliances. And by the way, your rates are going to go north swiftly as well, for obvious economic reasons.