Service levels of container shipping lines fell to woeful levels through the peak season, with September’s schedule reliability tumbling to the mid-50 percent level on Asia-Europe and into the 40 percent range on the trans-Pacific.
The reliability is particularly bad on the trans-Pacific, currently experiencing an extended peak season with tight capacity freight rates still increasing deep into the third quarter. Spot rates are at five-year highs for their 13th consecutive week, and US plans to increase tariffs on Chinese products from 10 percent to 25 percent from Jan. 1 are expected to continue pushing front loading by shippers.
US containerized imports through August are up 4.8 percent, according to PIERS, a JOC.com sister product. The Global Port Tracker, published monthly by the National Retail Federation and Hackett Associates, expects strong retail sales this holiday season to keep volumes high into November, although a sharp drop off is predicted after Jan. 1.
But amid this frenzy of activity on the Asia-US trades, and the addition of extra-loaders to add additional capacity, the schedule reliability has deteriorated significantly. In their tracking of carrier schedules, SeaIntelligence and CargoSmart found that the decline in reliability was markedly higher on the Asia-North America West Coast trade compared with Asia-Europe.
Asia-North America West Coast schedule reliability was found by SeaIntelligence to have recorded an incredible 23.3 percent year-over-year decrease in the third quarter, dropping to 54.3 percent in August and 44.2 percent in September. Asia-North America East Coast reliability dropped by 6.2 percent over the two months to 65 percent.
This was supported by CargoSmart data that revealed schedule reliability of carriers on the trans-Pacific fell from 61.2 percent in August to 44.1 percent in September.
On-time record — key performance metric for shippers
The worsening on-time performance is something that has long frustrated shippers, and this was raised in several conversations and panel discussions at JOC’s recent conferences, Container Trade Europe in Hamburg in September and TPM Asia in Shenzhen in October.
Shippers told JOC.com that poor reliability was part of the overall lack of visibility over their shipments, and it was expensive to manage.
“You can have the best run supply chain visibility in the business, but if the on-time arrival sucks as it does now, it doesn’t allow you to break down your inventory level. The inventory levels of some of our customers for fast moving consumer goods is three to four weeks,” said an Asia-based supply chain director.
Another shipper said, “If I don’t know what time my goods will arrive, I have to stock up. The poor reliability and visibility means that I have to hold 60 days of stock when I should be ideally be holding 10 days, so I am wasting 50 days of stock holding, and that is a huge cost for the company.”
It was a topic most shippers were happy to share their views on. The Europe-based head of a global retailer said, “Yes, there are typhoons, congestion, [and] poor port productivity. But the carriers do a terrible job in telling us what is going on with our containers. If the carriers can improve their on-time performance, I will be happy to pay more. But until then, forget it.”
A Hong Kong-based logistics manager for a global sporting brand said, “Back in the 1990s when carriers had on-time performance at the 90-plus percent levels we could carry smaller amounts of inventory. Right now we must hold up to 28 days stock. We are continually on at carriers and asking them, ‘what are you doing to improve your on-time performance?’”
On Asia-Europe, the on-time performance of carriers was better, but still at poor levels. CargoSmart found that schedule reliability among carriers fell from 62.9 percent in August to 54.7 percent in September, while SeaIntelligence data show that decreasing schedule reliability on a year-over-year level from Asia-North Europe in the third quarter deteriorated by 0.4 percent to 77.9 percent, and on Asia-Mediterranean routes was down 3.2 percent to 75.8 percent.
Maersk Line was the most reliable carrier in third quarter 2018, with schedule reliability of 76.1 percent, and was the only carrier to record a year-over-year increase in schedule reliability, albeit of just 1.9 percentage points. But SeaIntelligence pointed out that the poor reliability was industrywide, with the 15 global carriers all recording schedule reliability within the 51-73 percent range in September.
The analyst said there was a clear suspect to blame for the poor carrier performance — blank sailings that reached their second-highest level in the third quarter compared with the same period in the past seven years.
“While blank sailings do not directly impact schedule reliability as they are effectively not scheduled, catering for the disruptions they cause most certainly does,” the analyst noted. “This means that shippers have been hit with the double whammy of many blanks sailings and poor reliability on the sailings that are not blanked. With continued weak demand and excess capacity, this is an issue likely to persist.”