Hapag is making a big investment in dry container tracking for its containers. It hopes that knowing where containers are will enable quick turnaround. The sensors also provide data on temperature and environmental conditions if desired, and store the data for a prolonged period. They are solar-powered and can operate and store data for more than 5 years. They communicate via Bluetooth.
The belief is that knowing where the containers are in real-time will save travel time and also reduce pollution. No one really knows if this is feasible, but with real data, Hapag can start to find out what gains can be made from real-time location data.
Some shippers will be pleased as well to know where their cargo is at any time.
It’s an expensive program to equip the containers with this little device. It’s riveted to the door of the container. Hapag has something like 1.6 million containers to fit out.
The device must operate a lot like the HOBO devices used by archeologists and environmental scientists. Those units collect data like temperature and humidity, unattended, for long periods, and have enough storage so they don’t have to be queried and the data unloaded for months. The one I have is queried with a mobile phone app, and can run for six months before the data wraps around. A bit larger battery and a bit more memory and a bit more compression, and you have a proper device for a container.
US importers are not so worried about cargo waiting offshore to be unloaded. As long as they have enough for their sales or manufacturing, the cargo can sit on a container ship and the principal cost to the shipper is the interest cost. With interest rates at historic lows, that isn’t much.
The graph below from project44, a Chicago, I- based visibility platform, shows the number of TEUs at anchor by month from January through November 2020, on the left. The rise starting in August is significant. Using data from HSBC, which show a 3.2% annual interest rate, using an average container value of $40,000, they calculate almost $50M per month in new delay costs, and cumulative inventory interest costs over $850 million.
The point is that these costs are a lot lower than inventory costs at warehouses. While the cargo is held at sea under riskier conditions, in the warehouse other costs kick in, not the least of which is space required. Insurance charges on the financed inventory also accumulate. And there’s the work, both labor and mechanical, of shuffling the inventory around; it’s very variable given the specific warehouse layout, but can be significant also.
So shippers are using the offshore jam-up rather than wishing it away. Only when the demand for products ratchets up so that the offshore inventory is needed will the stakes change. While we have significant COVID likelihood today, that isn’t likely to change much.
It’s always interesting to look at the overall question of inventory cost in the supply chain. Advantages to shippers can come from unlikely places.
This article shows that it isn’t so easy to divert containers from LA/LongBeach to other ports. The smaller ports don’t have the infrastructure to handle the added containers efficiently. They may not even be able to get drivers to move the incoming containers. And how will they handle empties? Ship them to LA/Long Beach? It’s a complete mess for shippers and forwarders.
The article details some of the techniques people are trying. Each has its own set of problems to wrestle with.