Michaels Stores had a somewhat different experience in the chaotic first half of 2010 than that of many other large importers. Like many shippers, the specialty crafts retailer felt betrayed by certain carriers that did not make available the capacity Michaels was expecting under its service contracts. But as far as Michaels Stores was concerned, not all its carriers behaved badly. One, in particular, stood out: MOL.
“MOL acted with integrity and an eye toward a long-term, mutually beneficial partnership with Michaels during the worst year ever in terms of import shipping,” Richard Markovich, director of international logistics and compliance, said in an interview.
Indeed, a significant reason Michaels recently awarded MOL its “Transportation Partner of the Year” for 2010 was what the company described as the carrier’s stellar performance during that tense and difficult period when capacity seemed to simply vanish from the market.
A rare, even unprecedented series of events led to that heated environment in shipping: a surprise, restocking-led recovery beginning in late 2009 slammed headlong into the height of the carriers’ ship-idling campaign, when more than 550 ships were parked at anchor to preserve cash. After losing a collective $20 billion in 2009, some carriers gave a very narrow interpretation to contracts to sharply limit the capacity available to individual shippers and extract higher rates for the limited space they did have. Thousands of boxes were rolled to later voyages, merchandise missed store deadlines, retailer revenue took a hit, and shippers complained to the Federal Maritime Commission, which investigated but issued an inconclusive report last December, in summary form only.
Although no cases went to court in the United States — shippers were careful not to burn bridges with carriers — many shippers nonetheless were disillusioned by the experience, dropping carriers whom they believed let them down and in many cases signing contracts with non-vessel-operating common carriers for the first time.
It was out of this mess that Michaels, an arts and crafts retailer with more than 1,000 stores in North America that moves more than 20,000 40-foot equivalent units per year, singled out MOL and, somewhat rarely for a shipper, was willing to discuss the rationale publicly.
“We felt that in most ways they outperformed the other carriers that we dealt with last year,” Markovich said. “We had issues with a number of our carriers last year … who flat out violated some of the agreements that we had in terms of capacity. Some of those carriers we chose not to do business with this year.”
Markovich said MOL has been a loyal carrier to Michaels, moving large volumes of its cargo into Jacksonville, Fla., near one of the retailer’s distribution centers; so, in that respect, the relationship may be closer than most. But it still says something that while relationships were collapsing left and right in 2010, this one was growing stronger.
In deciding to single out MOL, Markovich said his team surveyed stakeholders both internal and external. “It’s not an assessment of what I have to say — we went out to all the stakeholders in the international supply chain. That includes the forwarder offshore, the domestic draymen here in the U.S., the people within our DCs who are involved in coordinating and dealing with the delivery to the DCs, as well as our people internally who do freight auditing and payment process on the bills as far as accuracy of the bills and timeliness,” he said.
“And then as the corporate owner, we looked at how we felt about negotiating a contract with them and how we felt about their customer service on a regular basis. Were they there only at contract time or were they there all year long? From an executive level perspective, how well connected did we feel with that organization?”
Markovich explained in detail the reason why MOL stood out last year: “While MOL increased rates to compensatory levels over the collapsed 2009 rates, they acted with integrity and didn’t take advantage of us,” he said. “They didn’t use the capacity reductions as an excuse to reduce the support and space commitments. They supported our service level expectations, which remained very good in terms of equipment availability and on-time sailings. Most importantly, they gave us a firm space commitment at the beginning of the contract term, larger than other carriers, and it was given without a bunch of restrictions on which strings we could use.
“Week after week, they met their commitment, often giving us additional space above their commitment when it was needed,” he said.
There is a simple but important lesson there that shippers and carriers must learn to live with each other. Both have been around forever, and they need to invest in relationships with a view beyond any current tumult in the market. Shippers aren’t buying their own ships, so they need carriers; carriers keep buying more and larger ships, so they need shippers.
The more people think like MOL and Michaels, the better off the industry will be.
Peter Tirschwell is senior vice president of strategy at UBM Global Trade. Contact him at firstname.lastname@example.org, and follow him at twitter.com/PeterTirschwell.