I am a keen follower of the shipping sector and one development from shipping companies over the past year or so and which has great implications is slow steaming.
Shipping companies – big and small – had taken a huge beating last year. With freight contracting like never before, they had no option but to layup ships. The few that were sailing were slow steamed to reduce bunker fuel costs. The result was that cargo took longer time to reach. On some routes like Asia-Europe / Asia-US, the delay was as much as a week.
We are now in the middle of 2020 and shipping companies are slowly wiping the red ink of last year. Month over month, freight volumes have grown. Container shipping lines are in full action and so much so that there is a shortage of containers reported!
But surprisingly, slow steaming remains very much on the agenda. The reason given is that this is good for Mother Earth. Slow steaming reduces bunker fuel consumption and GHG emissions. Saving the environment and being green is high on the corporate social responsibility of many companies now. Never mind the increased inventory carrying cost of the goods on sea which spend extra time and never mind the extra buffer stocks at all levels of the supply chain. Also please excuse the increased order cycle time.
Slow steaming has benefited shipping companies to a large extent. While freight rates and surcharges have gone up significantly this year, the savings due to reduced fuel consumption are also good. With top and bottom lines improving, shipping companies want to maintain the status quo.
So if you are a shipper, brace yourself for delays and longer lead times. Till such time ships get powered by LNG or kites, slow steaming is here to stay. System integration
On the other end of the spectrum, is an equally interesting type of Logistics service – Emergency or Expedited Logistics. This sector has also been growing steadily over the past few years.
Expedited freight services thrive on supply chain disruptions, bad planning, missed supply or demand signals, and a myriad of other factors which lead to cargo being moved on premium mode viz. air charter, helicopter charter, dedicated truck et al. Moving and delivering the consignment urgently becomes the ultimate aim and cost considerations are thrown out of the window.
For example in the auto industry, lack of a critical spare part has the potential to halt a complete production line resulting in thousands of dollars of losses. In such a situation, getting the spare part at ‘any cost’ becomes the priority. Enter expedited logistics companies who will take care of your requirement. With a sophisticated partner network and military like precision, they can get your parts delivered within the required time frame.
Logistics activity has many shades; the two ends being discussed above. As business and world trade evolve and grow, the need for different kinds of services will also change. Balancing cost, carbon and time to give the shipper a good value proposition is indeed tricky.