Here’s one thing shipping customers and transportation operators certainly should agree on: Shipping goods from one point to another should be far simpler than it is today.
That was one important message from carriers and customers alike at last week’s annual joint meeting of the National Industrial Transportation League, the Intermodal Association of North America and the Transportation Intermediaries Association.
Behind the reliable calls for, well, reliability on both sides of the shipping equation, there is a growing frustration with the roller-coaster ride in broad markets and the tortuous complexity that has brought to the basic flow of shipments as operators have pushed and pulled at various parts of the distribution channel to maintain some financial equilibrium.
“The volatility in ocean markets is off the charts for carrier and the customers,” said Terry Bunch, the logistics chief at U.S. forest products exporter Rayonier.
One response, he said, has been a scramble by carriers to find different ways of adding on charges and fees to shore up underlying revenue even as basic rates move through wild gyrations. Bunch says as he goes through carrier bids, he does score proposals on rates, but not the rates themselves. He says he is concerned with the “rate process” — that the business remains consistent, reliable and competitive.
That also means “a simple rate structure,” Bunch said. “There tend be a lot of different categories of changes, some of them very creative.”
Don Pisano, vice president at American Coffee, a major importer based in Jersey City, N.J., told the meeting simplicity is high on his wish list. “I have too many columns in my Excel” for rate categories, he said. “When we sell coffee, it is based on the price per pound. And whatever that price is, that is what we charge. We don’t add on a series of extra charges — an invoicing fee, a transaction fee, a terminal handling charge, and so on.
“We need consistent trade practices. From an importer’s perspective, we have complications when we have different carriers charging a lot of different fees,” Pisano said.
There’s no simple path to simplified shipping, however.
Neither of those shippers saw any immediate help in a rate index to help smooth rate changes, and diving into derivatives trading was not on their agenda. “There are risks and there has to be a level of sophistication in dealing with derivatives,” Pisano said. “I’m not sure much of the industry is willing to put the resources behind understanding that and guarding against the risks.”
Besides, said Bunch, whose company is a big U.S. exporter, packaging up about 50,000 TEUs of business around the world, “There is no index for U.S. exports.”
Michael Blach, vice president for key account management at Maersk Line, said shippers want to restrain the volatility in their costs, but not at the risk of losing ground with their competition. “Many can handle it when they are $1,000 better than the market,” he said. “But very few can handle it when they are $1,000 worse than the market.”
After all, the goal is to make shipping simpler, not more costly.