The constant stream of blanked sailings is predictably disrupting many supply chains and networks. Shippers are not getting the message, and it’s costing them extra, unplanned expense. That will percolate down to their customers as well, both in reliability and costs.
And shippers are complaining. No wonder!! The carriers are bringing it on. They are not considering ultimate customer needs.
Anyone wanting to create a disruption in maritime and hinterland supply chains will pay attention and try to do something about this.
It appears that ocean carriers are again playing fast and loose with delivery dates for cargo. There’s a telling remark by an NVOCC source: “You might be able to book at that rate, but you have absolutely no idea when you are going to get the boxes shipped.”
Carriers still have not got the message that most shippers want their cargo when it was promised. There might be a few that can stand a long delay, but the trend in inventory over the last 20 years has been toward rightsizing inventory by factoring in its logistics. You can’t do that well if there is substantial variation in lead times. The formula for overall variation of inventory— measured by variance (square of standard deviation)— weights variance of lead time by the demand, but variance of demand by the lead time.
Looking at the formula, a mathematical truth deducible simply from the definition of variance and the assumption of independence of demand and lead time distributions, shows that often lead time variation has an outsized effect.
Ocean carriers can’t control the demand, but they can control the lead time. But it seems that they ought to spend more time thinking about how to help keep the customer’s overall variation low, rather than only dealing with what they alone can control.
Time to get on the supply chain thinking boat! It left the dock years ago!
Alexander Whiteman mentions that the Shanghai Shipping Exchange (SSE) and Cargosmart are defining a new index of carrier reliability. Current reliability is around 80%. That means 1 in 5 ships are not arriving on time.
A good reliability index should prove useful to shippers trying to choose a carrier for their cargo. If you need it on time, you need to pick a high reliability carrier. Forwarders and NVOOCs, who buy blocks of slots on carriers’ ships for resale, will be moved to choose carriers who won’t cancel and who won’t delay the ships. The index should also be useful to them.
I’ve been complaining for a while that carriers are not addressing the problem of erratic timing of shipments, and it’s a serious customer service issue for them. It’s time they started addressing it. True, the larger ships made it more of a problem, but that is of their own doing. Customer service improvement costs money, but you make it up by holding onto good customers longer term.
Supply Chain and Logistics 