Shippers, Carriers

It may finally be time to say that the fractured relations and frustrated feelings that grew out of the ocean shipping industry’s capacity management fracas of 2009 and 2010 have led to something close to positive.

That’s not to say there are not some raw nerves over the confrontations that came out after carriers went through a rapid drawdown of capacity during an unprecedented downturn and then saw shipping markets turn chaotic as shippers sought to rush goods to market in early 2010.

But that capacity crisis may have done more than any single event since transportation deregulation to focus both shippers and carriers on the nature of their business relationships and to highlight how the basics of shipping underpin supply chain efficiency.

That was at least how it sounded to us at last week’s Journal of Commerce TPM Asia conference in Shenzhen. Container ship line executives who have long bristled at the label of commodity service found a kind of common ground with shippers who talked about the essential role of carriers — the carriers they chose, at least — in broader supply chains.

“We believe the carrier industry should get a fair price for the product they offer,” Richard Smith, vice president for transportation at Sears Holdings, told the meeting. “That should not necessarily be the lowest price on the street.” That’s not to say there are warm hugs going around. “We certainly look for a competitive price,” Smith said.

But even in the tough words — and there is still plenty of ill feeling in the market — there at least is some direct talk on both sides of what the expectations are and what needs to be done to meet those expectations. Sears, Wal-Mart and Electrolux all said they are providing their carriers with rolling forecasts on their projected demand and shipping needs, part of the greater transparency carriers and shippers said they needed in the wake of the downturn.

Wal-Mart officials even said this month they are amending a tough inbound logistics program they launched 18 months ago in the United States, saying they’ve learned some lessons from their transport suppliers. Communication, it seems, was going in both directions.

And that communication continues to be part of the plea shippers are making.

In hearing container line proposals for his business, said Richard Iozzo, global manager for logistics and compliance at office products manufacturer Fellowes, “not one time did a carrier ask me, ‘What is your business like? What can we do to help you do your business? What keeps you up at night?’

“Those conversations didn’t happen,” he said.

These shippers said they understood carriers were trying to manage their businesses in difficult times. But decisions to pull services, withdraw strings and drop port calls also should come with communication.

“You drop that bomb on us after we’ve purchased the product, after we’ve talked to the suppliers and gotten a commitment for production and lined up the supply chains to deal with it,” Smith said.

Carriers have always insisted their business is an essential component of supply chains. Now it looks like more agreements with shippers are starting with that premise.

Paul Page is executive director of The Journal of Commerce. He can be contacted at 202-355-1170, or at ppage@joc.com. Follow Paul Page on Twitter, www.twitter.com/paulpage.
 

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