Finding a Higher Gear

The relative calm of ocean transportation becomes choppy for international freight as soon as it hits land in North America. On the water, ships may get bigger, the rates may get more volatile and the voyages a bit slower. But the basics haven’t changed. Containers are the same size, contracting occurs much the way it was years ago, and roughly the same cast of carriers prevails.

Once the goods hit the shore, however, it’s fast-forward. Transloading, as just one example, is gaining traction as shippers seek to liberate cargo from the constraints of 40-foot containers and take advantage of a variety of supply chain benefits.

As we write in the agenda for The Journal of Commerce’s inaugural Inland Distribution Conference Sept. 18-19 in Kansas City: “Shippers that transload from ocean to domestic equipment at seaports can realize a wealth of benefit, including fuel savings, freight cost saving, avoiding per-diem and demurrage cost, managing or eliminating chassis issues and allowing the ocean carrier to achieve higher utilization when containers don’t move inland. Shippers can also realize benefits from multishipper co-loading/consolidation at origin and servicing multidelivery points through DC bypass. Transloading also allows the shipper to prioritize or postpone delivery into a location based on inventory needs or capacity constraints. Transloading has been growing: transloading in L.A.-Long Beach in 2012 increased to 31.9 percent of total imports, up from 30.3 percent in 2011, according to TTX.”

But transloading is the tip of the iceburg in terms of changes sweeping through logistics beyond the seaport — the inland distribution process we describe as “the process of strategically transporting and positioning imported goods at inland North American locations for effective onward distribution to retail locations and direct to consumers. Conversely it is the process of moving exports to coasts and land borders and how imports and exports converge at inland hubs.”

Whereas retail merchandise and other cargo used to stop and start multiple times along its path, today its movement is a continuous flow, more slowly as shippers seek lower-cost transportation modes such as intermodal, but more continuously, the outgrowth of better planning, improved visibility and a relentless push to reduce cost and inefficiency out of the system, often driven by chief financial officers.

To accomplish this, shippers are juggling transportation modes as never before; whereas shippers’ use of modes used to be fairly static, today shippers are increasingly flexing among truckload, less-than-truckload and intermodal, depending on where goods need to be and when.

As we describe in the Inland Distribution program: “In the past shippers were to some extent defined by the mode or modes they used, and if they utilized more than one mode it was part of a set strategy that changed little from year to year. Today that has all changed. As truckload capacity tightens and rates go up, shippers aren’t just converting to intermodal but adapting a dynamic, flexible approach that could involve a mix of intermodal, LTL, parcel and private fleets that better serve more complex, fast-changing supply chains. That could involve sharing space in trailers or containers with other shippers, converting parcel to truckload or LTL to parcel.

“LTL in particular is coming out of a massive realignment that better positions the sector to connect with seaports and has left it more efficient overall. Driving modal flexibility is data and technology that didn’t exist just a few years ago, often made available by 3PLs and non-asset freight brokers. Understanding how to operate in such a dynamic transport environment is critical for shippers that need to optimize transportation to reduce costs and support company strategy.”

As shippers seek logistics solutions in response to pressures in their own competitive arenas — like how to respond to Amazon if you are a retailer — they are confronting a transformed transportation landscape. For example, as we further state in the Inland Distribution program, “Since deregulation in the 1980s, long-haul trucking has been a reliably low-cost transport option for shippers. If you didn’t like one carrier’s rate, there was always another carrier ready to haul freight for less. Lower trucking costs helped reduce the cost of logistics as a percentage of GDP. But those days are fading in the rearview mirror, and the clock is ticking for shippers who don’t rethink their transportation strategies. For any number of reasons, many of them legacies of the Great Recession, shippers can expect trucking rates to trend upward over the long term.”

And trucking sectors such as LTL look very different, as we write: LTL carriers have “closed hundreds of terminals, reflowed distribution into new lanes and slashed transit times. In part, this is a reaction to the billions of dollars lost during the recession — these companies had to change to survive. But more and more, the changes reflect new supply chain realities, including slow-steaming container ships, embarrassingly lean inventories and same-day e-commerce orders.”  

The agenda for the Inland Distribution Conference can be found at http://bit.ly/179hbmb. We invite you to join us in Kansas City in September.

Peter Tirschwell is senior vice president of strategy at UBM Global Trade. Contact him at ptirschwell@joc.com and follow him at twitter.com/PeterTirschwell.

 

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