Tag Archives: poor service

Softening spot rates could mean ‘days are numbered’ for ad-hoc carriers

Spot rates for container shipments might be coming down from the stratosphere. There are a few indications, such as Xeneta’s XSI short-term index from Asia to North Europe.

If short-term rates really are coming down, what is going to happen to many new ocean shipping entrants in the trade from Asia? These new firms offer regular shipments with no blanking, faster transits, calling at less congested ports for faster unloads, status monitoring, and good communication.

Most of these firms have a limited number of smaller ships. The conjecture here is that they cannot survive if rates drop back to reasonable levels.

I think this position underestimates the value of on-time and reliable service. Many shippers will pay to get out of the bottleneck system the alliances are running, with large ships calling at large congested ports, and frequent delays of service, including simply canceling voyages if they aren’t full enough. You can’t have a viable business if you’re only on-time 30%-40% of the time. Lots of customers will choose another way.

We have already seen large container shippers such as Amazon, IKEA, and Costco choose dedicated service with captive vessels for some of their cargo. If it works well, that could expand, leaving the major alliances with less cargo to carry.

Interestingly, the large ocean carriers have a new name for what they are doing. Canceling a voyage is not to be called ‘blanking’, but rather ‘sliding’. Whatever you call it, it’s a disruption in service supposedly guaranteed.

By Mike Wackett 11/02/2022

Softening spot rates could mean ‘days are numbered’ for ad-hoc carriers – The Loadstar

Vessel schedule reliability lowest on record

The nice graphs here show that ocean carrier schedule reliability is extremely low, hovering between 30 and 40%.

Source: Sea-Intelligence, via Port Technology International

The COVID years of 2020 and 2021 have seen a remarkable drop from the 70% to 80% reliability of 2018 and 2019. Is COVID likely the culprit? To some extent the disruption it triggered caused order fluctuation that the ocean carriers with their very large ships were not prepared for. The ensuing port congestion coupled with the practice of blanking sailings of the very large ships when they were not nearly full caused the drop.

I don’t see how a service with a 30% to 40% reliability can maintain itself. The ocean carriers say that back to normal demand will fix the problem, but the fact is that demand for instance from Asia to the West Coast US is actually still below peaks of 2019. So normal demand would be higher, not lower.

Vessel schedule reliability lowest on record 27 January 2022 Port Technology International Team

Vessel schedule reliability lowest on record – Port Technology International

STB chairman wants Norfolk Southern to explain deteriorating service

On the heels of a letter to CSX rail seeking explanations for poor service, the chair of the STB wants explanations from NSR. Why have rails in the East been letting their service level decline?

One explanation that’s been offered is a shortage of labor. While it’s true that rail labor is skilled and highly paid work, in the current situation there are plenty of people looking for better jobs. Rail offers those. And with unions to help, training should be available. So some effort should produce more workers, well trained. It doesn’t seem like a good explanation to me.

Perhaps the rail managements are thinking, “If everything else is congested, no one will notice if we have a little congestion too.” Another way to put it: lack of attention, and no desire to take action.

One interesting item in the article is the possibility of reciprocal switching in the US. Canada has had it for years, but the number of rails in Canada is smaller. The generic name for the practice is open switching.

The idea is that a shipper could take advantage of competition between rails if it were allowed to transfer shipments from one rail to another at specific locations where the rails met. There would be charges for the interchange to be sure, but the result might be a lower total cost of shipment.

There are significant hurdles to implement open switching. Workers have to be trained, and there would be multiple inspections required for safety and compatibility. And equipment would be needed to support interchange. Who would pay for it? These are bigger concerns in the US where there are six Class I rails, any pair of whom might be candidates for open switching practice at certain locations.

It’s not clear that allowing open switching or reciprocal switching as the STB calls it would really foster much competitive increase. However, there could be times, such as when there is severe congestion at an origin or destination, that open switching capability would save the day for many shippers.

It’s an example of meeting the need for resilience in our rail-using supply chains. I think the competitiveness aspect is fine, but the overall resilience is a much greater factor. It would put rails in a position to challenge trucking if switching could be done smoothly, even with charges.

Another view of reciprocal switching is presented in the final article below. It’s from the American Association of Railroads President, via Logistics Management magazine. He gives a positive view of rails’ contributions to the great supply chain jam-up of 2021, and talks more extensively about the ongoing discussion about reciprocal switching. It seems rails are not enthused about it.

Joanna Marsh Friday, November 26, 2021

STB chairman wants Norfolk Southern to explain deteriorating service – FreightWaves

Joanna Marsh Friday, October 1, 2021

No simple swap: Ins and outs of reciprocal switching on US railroads – FreightWaves

By Jeff Berman, Group News Editor · November 29, 2021

AAR President and CEO Jefferies addresses myriad topics at RailTrends – Logistics Management