NEW-AGE LOGISTICS ATTRACTING OLD-LINE CARRIERS

NEW-AGE LOGISTICS ATTRACTING OLD-LINE CARRIERS

Don't look now, but there are signs those old-fashioned steamship lines are getting serious about new-age logistics.

Skepticism would be understandable.Steamship lines have traditionally been asset companies first and foremost, devoting the bulk of their talent and resources to acquiring and operating ships, terminals and container fleets in the most efficient manner imaginable.

The challenges inherent in running a steamship operation are so consuming that traditionally there was little time or energy left over to think or act outside of the box about what the customer might want and how those needs could best be met.

Further hampering the development of creative solutions by steamship lines have been low rates and returns, and often less-than-friendly customer relations.

If all your customer wants to do is take advantage of you, why go out of your way to help him? This was the thinking during the era of steamship conferences and publicly filed rates and service contracts.

In other words, in days gone by.

Today things are different, in no small part because of that much-dissected piece of legislation called the Ocean Shipping Reform Act. Yes, it allowed real, confidential contracts to be negotiated by the actual parties to the contract - individual shippers and carriers. But beyond that, the law has released carriers from the rigid confines of the conference system to think differently about their business.

Now that many of them are doing business directly with their customers for the first time, they can see much more clearly what customers really want - be that a multi-trade-lane contract or an integrated service.

Carriers never had an incentive to better understand their customers when contracts were boilerplate and needed approval by the conference membership.

Now, like any profit-minded service provider, lines are going out of their way to satisfy. The result is innovation that is unusual but very encouraging.

Some might argue that, as the owners of the principal assets used in international trade, the lines are asserting themselves in ways they should have employed long ago.

What are we talking about here? On one hand, carriers are more flexible with contracts, offering multi-trade-lane contracts, contracts of short duration or with special services tailored to individual customers.

But some are going beyond that into new territory. The services leading-edge carriers are beginning to offer involve integrated transportation. That's what many shippers say they want - fewer providers and technology that allows them to better manage their international supply chain.

Such services offered by the major lines are not going unnoticed.

Rep. Wayne Gilchrest, R-Md., chairman of the Subcommittee on Coast Guard and Marine Transportation, got an earful at his hearing last week on the first year of OSRA.

''The ocean shipping industry is fast becoming focused on total transportation service from origin to final destination, including many of the activities that have typically been in the realm of forwarders and NVOCCs (non-vessel-operating common carriers),'' said Richard J. Gutierrez.

He is vice president of Footner and Company Inc., a family owned forwarder, customs broker and air cargo agent operating at the Port of Baltimore.

''Not only do the lines have the ability to provide confidential contracts to shippers, but they are now 'bundling' services such as freight forwarding, customs brokerage, ocean transportation and consolidation,'' Gutierrez said in his prepared testimony.

His comments were part of an overall point that allowing carriers but not NVOCCs to sign confidential contracts is unfair - an argument we're certain to hear more of.

But the comments also show where the industry is moving. Gutierrez mentioned APL Ltd. and Maersk Sealand as two carriers advancing aggressively in this area.

APL, in particular, under former Maersk partner Flemming Jacobs, is surging ahead in becoming a player in the transportation corner of the new economy. Its Web-based information systems, which allow shippers to access tracking data over a hand-held device and divert shipments en route, are leading the industry.

But others aren't far behind.

At this week's Freight Transport Dynamics Executive Summit conference in New York (sponsored by The Journal of Commerce Group and Morgan Stanley Dean Witter) Andy Rosener, the international logistics director for Hasbro Inc., discussed a successful relationship his company has with Cargo System, a sister company of Orient Overseas Container Line.

Rosener said Hasbro, by using Cargo System's technology, has achieved in-transit visibility over the Internet for both ocean and air cargo, regardless of whether it's using OOCL for ocean carriage and whether the shipment originates in Asia.

He said Hasbro helped OOCL develop the technology. Hasbro has integrated the system into its global operation, requiring, for example, its customs brokers to follow shipments on the Internet so containers don't get delayed at the border.

I don't think anyone believes the high-end logistics business will be the panacea for the container shipping industry. It's still plagued by unacceptable returns, and no forecast for this industry that I've seen suggests that a significant turnaround is in the works.

But the companies that dedicate themselves to climbing the value chain will find many years down the road that they're more profitable than they otherwise would be, and less vulnerable to the vagaries of supply and demand.

APL is certainly one such company that is thinking in this way, as made clear by its recent hiring of Mercer Management Consulting. Others will surely follow.