The hunter and the hunted

The hunter and the hunted

Poaching: "to trespass on another's property in order to take fish or game." Historically, punishment for this crime has differed according to when it was committed. Poaching at night has resulted in the punishment by death, while daytime poaching was less severely judged.

Today, in transportation, poaching has become common as the "freight recession" becomes a full-blown economic slowdown, and all participants look to secure business.

The intermodal food chain is inhabited with third parties. Asset-based carriers have sought to outsource sales, customer service and door-to-door handling, while hoping to secure large blocks of "wholesale" business. These third-party companies - shipper agents, intermodal marketing companies and non-vessel-operating common carriers - frequently have been nonunion, non-asset and entrepreneurial. They were originally intended to complement asset-based service offerings by providing a "retail" sales channel.

A generation ago, the introduction of double-stack train operators added an additional wholesale party between the railroads and IMCs. As long as these "fourth parties" acted as virtual railroads, the boundaries were clear. When stacktrain operators expanded into door-to-door service, however, the fear of back-solicitation grew.

Non-asset-based companies can hardly compete with their underlying asset-based carriers if that carrier eliminates them from the transaction to increase its own revenue and increase return on assets. In intermodal, there is extensive speculation about how prevalent this practice will be in 2008. As competition develops among carriers and their underlying infrastructure providers, questions exist about who controls the sales channel and - literally - which channel will be used.

One of the more recent - and dramatic - examples of poaching was the Port of Tacoma's successful inducement to woo NYK Line from Seattle by offering to build a new terminal in Tacoma. Not only did Seattle lose a customer of over 100 years, but it will leave a large volume deficit for the port to fill.

Tay Yoshitani, Seattle's executive director, lamented that it was "another case of Tacoma expanding at Seattle's expense" and opined that regional and statewide interests would be best served to focus on the competition posed by ports in California and British Columbia. Tacoma contends that NYK would likely have moved to one of these locations were it not for its offer.

There is no shortage of poaching opportunities. Hutchison Port Holdings is looking to lure SSA Marine business at Manzanillo, Mexico, to its new facility at Lazaro Cardenas. Meanwhile, Hutchison and SSA are seeking to protect their business from a proposed terminal to be built at the greenfield port of Punta Colonet.

To add insult to injury, some ports that have lost carrier services - and volume - must protect themselves from proposed new capacity. The Port of Portland, Ore., is confronted by a potential facility at the resurrected port of Coos Bay. Two new terminals in Melford and Sydney, Nova Scotia, threaten the Port of Halifax.

Meanwhile, some ports seek to combine or to align their structure and/or commercial focus. For example, three ports in the Vancouver, British Columbia, area (Vancouver, Fraser River and North Fraser River) this month combined to form the Vancouver Fraser Port Authority - quite a change from their previously disaggregated structure.

Also of interest is the proposed South Atlantic International Terminal planned for the South Carolina side of the Savannah River. After years of dispute between the Georgia Ports Authority and the South Carolina State Ports Authority, both agencies have come to realize that the proverbial half loaf was acceptable. An interstate compact creates a jointly funded office to manage the development of this facility - and to seek private capital.

Such cooperation always sparks rumors of merger. But the governors of Georgia and South Carolina maintain that continued competition between Charleston and Savannah - and ultimately Jasper County - is preferable to a single port authority.

Ports are like railroads; assets once deployed cannot be moved. Decisions made today must be "right" for decades. Poaching may seem like an attractive solution to short-term business needs, but unintended consequences may develop over time.