Shippers, Carriers, 3PLs & port operators discuss the future of the Container Supply Chain
Capacity, volatility, reliability and sustainability among key themes discussed on the first day of TOC Container Supply Chain conference in Antwerp
Day 1 Conference Review
Antwerp, 12 June 2012. Over 300 professionals from across the Container Supply Chain are gathering this week in the Belgian port city of Antwerp for the annual TOC Container Supply Chain conference. The first day of the conference saw senior executives from shippers, logistics service providers, ocean carriers, port authorities and terminal operators engage in high level debate on the interface between supply chain design and transportation assets and infrastructure.
In the opening plenary session TOC CSC delegates were given a comprehensive review of current market conditions. Moderate growth is expected in the upcoming years within the maturing markets of Europe, the US and North East Asia (excluding China). However, explained Mathijs Slangen, Senior Analyst at consultants Seabury, more significant trends can be discerned from the wealth of trade data.
China, for example, recognises most of the future growth in container trades will come from emerging markets. This is already being seen in the diversification of China’s exports. The number of partner trading countries with China has doubled in 10 years with the main growth coming in Africa, Middle East and Central America.
The implications for forecasting trade volumes are that changes in GDP are no longer necessarily reliable indicators of changes in container trade volumes. Indeed, many more bulk cargoes are now being containerised such that container trades could well continue to grow ahead of trends in general economic performance.
This view was echoed by Luc Jacobs, SVP Ocean Freight, Head of Global FCL, DHL Global Forwarding. He said the global logistics group was seeing good growth levels in a number of trades away from Asia-Europe. North-south, intra-Asia, intra-Latin America, Asia-Middle East and other trades were all recording sustained growth. Mr Jacobs said this would necessitate a rethinking of many supply chains and adapting focus to suit the evolving patterns of global trade.
Mr Jacobs also raised the issue of index-linked freight contracts to give greater predictability to logistics chains. However, if these were to be implemented, he added, they would have to be very simple in concept so that all parties along the supply chain were completely clear as to their liabilities.
Turning to terminal facilities, Neil Davidson, Senior Advisor - Ports, at consultants Drewry, noted that Europe has a lot of capacity additions in the pipeline, for example, in northern Europe alone, some 8.5 million TEU of extra terminal capacity (the equivalent of a ‘new Port of Antwerp’) is due to come on stream between now and 2016. However, although this is in the face of uncertain economic growth, it should not be a cause for concern as the investments are for the long term and most of the new capacity is focused on coping with increasing vessel size.
The opening session was rounded off by Patrick Verhoeven, Secretary General, European Sea Ports Organisation (ESPO), who gave an overview of EU Policy and Seaports. Shipping is now very much a key focus for Europe’s transport regulators, he said, particularly in terms of its emissions record and the perceived view that these should be reduced.
Until very recently ports themselves had been on the margins of Europe-wide policy initiatives, such as TEN-T. However, new proposals bring ports to centre-stage, said Mr Verhoeven, with the proposed creation of 80+ core network ports and clusters. These have been earmarked for investments to offer adequate hinterland connections by 2030, including 10 multi-modal corridors starting and ending in ports. Ports are also at the centre of proposals covering concessioning, public financing and state aid, and most controversially, the reform of port labour.
In the second plenary session, three major shipping lines gave their perspectives on the current state, and future progression, of container liner trades. Michel Marstroom, of Maersk Line, said there was real value for shippers and cargo owners in engaging carriers in longer-term, stable partnerships. Coupled with the need for continued innovation and development of operational efficiencies on the land side, the ‘prize’ for customers in terms of supply chain costs, improved efficiency and lower environmental footprints is worth far more than the short-terms gains (or losses) on freight rates experienced during recent volatile market conditions. “Greater market stability will enable customers and carriers to devote more time to realising value from carriers’ services and potential.”
Stanley Smulders, MOL, emphasised the positive aspects of the recent round of container liner groupings and alliances. He said the new groupings represented a paradigm shift in the sector which has driven down the fixed cost element of liner shipping relative to other costs. This makes the larger entities more able to adjust to changes in capacity and demand without less of the disruption that had previously characterised the sector.
Now, cargo acceptance is no longer on the basis of ‘better than empty’, irrespective of trade direction. If the fuel and port/canal costs are not being covered, why sail a vessel, when multiple strings will always provide adequate connections?
Mr Smulders said that where shippers could very much contribute is giving realistic volume forecasts. This will smooth capacity constraints as shipping lines are flexible enough to adjust the capacity if it is really required.
MOL’s intention, he concluded, is to meet and exceed customer needs by: providing a premier, cost effective and reliable service; and prioritising safety, environmental protection and financial stability. MOL’s commitment to its customers will be translated into publishing a number of Key Performance Indicators (KPIs) on a dedicated website www.countonmol.com
Saar Dotan, Europe Area Managing Director, ZIM, described how his company is responding the significant changes that have occurred in container shipping by refocusing from being operationally-oriented to customer-oriented. This also implies a shift from a transactional to relational focus with its customers.
To give a shipper perspective, Raf J. Cornelissen, Global Marine Dry Cargo Manager, Exxon Mobil, explained that a common source of frustration when dealing with carriers is frequent service changes, and booking delays or recycles. This encumbered his company’s commitments to its own customers.
He outlined a shipper ‘wish list’ that include: transparent and fair pricing; robust base service reliability with differentiated services on offer; and an efficient and simple transactional model that would lower the total cost of container shipping for all parties involved.
The following discussion session also included comments from Jochen Gutschmidt, Head Global Ocean Transport Procurement, Nestlé, and Peder Winther, Senior Vice President, Seafreight, Kuehne + Nagel. Mr Gutschmidt said that, like many shippers, his company was prepared to pay fair prices for freight carriage but on the basis of greater consistency of service.
The final session of the day looked at the critical role of hinterland connectivity in executing efficient container supply chains, as, with current freight rates, the landside movement of a container is generally the major cost component outweighing entire deepsea legs.
It was clear in this session that the sustainable supply chain is becoming a key strategic driver for many shippers which in turn is driving service suppliers to innovate more sustainable transport options. Alexandre Gallo, VP Intermodal, CMA CGM, pointed to his company’s Greenmodal Transport initiative. Rail and barge are now strategic development within the French carrier group to offer customers environmentally-friendly logistics solutions.
But at the same time cost of transport remains the most relevant criterion for modal choice. It is also the most sensitive variable, and one of the main challenges for intermodal transport operators in order to keep their market share is to provide transport services at competitive rates.
Thomas Lütje, Managing Director of HHLA Container Terminals GmbH, pointed out that infrastructure, especially in the hinterland will become more and more the major bottleneck in supply chains. This is compounded by enormous ‘truck peaks’ during the day, whereby ‘rush hours’ at terminals cause congested roads in the hinterland.
In port of Hamburg a number of initiatives are taking place to alleviate this, as well as to cope with rapidly increasing container volumes generated by larger vessel sizes. The initiatives include optimising feeder operations, increasing the number of block train services, raising utilisation factors of intermodal services and implementing a truck management system on Hamburg’s roads.
From a shipper perspective, Jason Keegan, Head of Logistics at Marks and Spencer, was candid about what his company wants from the logistics industry: better service, a greater range of products, long partnerships, stability of market, flexibility, and innovation. What we don’t want, he added, are: constantly changing prices and unreliable service, hidden costs, rigid service offerings, and lack of transparency on port costs.
His challenge to the logistics industry is to “Think like your customers”, and to establish more direct commercial relationships, based on open and honest partnership.
Charles Meaby, Commercial Director, DP World London Gateway, gave a case study of the UK’s newest port development, which will be the closest port to the largest urban zone in the EU, offering significant inland cost savings, as well as Europe’s largest logistics park with over 9 million sq ft of warehouse capacity.