As the legendary New York Yankee catcher Yogi Berra once said, “A nickel ain’t worth a dime anymore.” But you can still get just about anything you want as long as you want to pay for it. Just ask customers of French carrier, CMA CGM.
The carrier would like to offer its customers better service, but only if they’re willing to pay the price, CMA CGM CEO Rodolphe Saade explained in the opening session of TPM.
"Service is not free of charge, it has a price,” Saad goes on in Shipping Watch’s report. “Container carriers are investing heavily in assets, technology, terminals and state-of-the-art ships with LNG propulsion. And it has a price. We have to explain to our customers that everything comes with a price."
The last year has been difficult for shippers and carriers alike. COVID-19 first limited supplies and slowed ocean freight shipments before signs of a recovery spurred an imports boom that caused a shortage of both equipment and containers. Saade described some of his company’s investments in addressing service levels during the TPM session, including the company’s purchase of several new planes to boost its capabilities in airfreight.
There’s no way to stop vendors and carriers from raising prices (and it’s really hard to keep them accountable to service levels in return). Stories like these serve as an urgent reminder that the only way shippers and LSPs can maintain balance is by digitizing the processes and workflows that take place between parties to ensure that every business partner is holding up their end of the bargain.
If something costs more, does that necessarily mean it’s any better? While some business leaders seem to think so, the fact is container carrier vessel reliability has reached an all-time low.
Only about a third of container vessels arrived on time in January. Global schedule reliability was about 34.9% through the first month of 2021, down about 33.5% from the same period last year, Sea-Intelligence analysis indicates. Zeroing in on the United States, which has experienced an import boom since the pandemic took hold, January on-time performance was only about 13.8% for trans-Pacific cargo, and about 21.5% for freight crossing the Atlantic.
While it’s likely that much of the performance issues are caused by COVID-19, poor performance at sea causes a bullwhip effect that extends from suppliers all the way to the final mile of logistics.
It’s not just trans-Pacific trade that’s causing a crunch on ocean freight. Intra-region trading across Southeast Asia could be affecting it too.
Fewer people are taking flights in the COVID-19 era, which means there are fewer planes in the air. And with fewer planes in the air, there’s less belly space for e-commerce cargo to be transported across a specific region. Within Southeast Asia, that tightening of capacity has caused more e-commerce companies to turn to ocean freight as a result.
Speaking with The Loadstar, an executive at Indonesia-based J&T Express says the shift is not only the result of more consumers buying goods on e-commerce platforms, but also making purchases of larger items. But at the same time, the executive believes the ongoing container shortage will continue to make shipping more expensive for all involved.
“But that is only for the short-term,” the exec said. “Post Covid-19, with air freight resuming, the pressure on sea freight will be reduced.”
One of the world’s biggest LSPs is about to get bigger. In a deal said to be valued around $1.5 billion, Kuehne + Nagel International is taking a majority stake in Apex International,.
In Apex Logistics, K+N is taking on a business with about 1,600 employees and $2.3 billion in annual turnover, according to Transport Topics. Although the deal must first pass regulatory scrutiny, it will increase Kuehne + Nagel’s presence in Asia as well as its capabilities in air freight. Apex handled about 750,000 tons in air freight volume in 2020, reports Logistics Management.
Kuehne + Nagel CEO Dr. Detlef Trefzger said in a press release that he looks forward to welcoming Apex’s team.
"The combination of Apex and Kuehne+Nagel provides us with an opportunity to offer our customers a compelling proposition in the competitive Asian logistics industry, especially in e-commerce fulfillment, hi-tech and e-mobility,” he said.
Kuehne + Nagel has some 78,000 employees across 1,400 locations in more than 100 countries.
They say a chain is only as strong as its weakest link. But are the weak spots in a vast and interconnected supply chain network? The United States government is on a mission to find out.
President Joe Biden ordered a 100-day review of U.S. supply chains this week, placing government focus on possible weaknesses within supply chains critical items, such as medical equipment, computer chips, rare earth materials and batteries. While the early days of the pandemic showed weaknesses in just about every type of supply chain, there’s been a lasting effect for these types of materials that is affecting medical manufacturers, automakers and high tech. A recent global chip shortage has been particularly tough on consumers looking to buy things like new vehicles or video game consoles.
As The Washington Post notes, a government study of supply chain vulnerabilities is one thing. Taking next steps to mandate change is another challenge altogether - especially as many industries’ supply chains have become so intertwined with operations in Asia, and especially in China.
Have a happy Friday, folks!
Don’t forget to check out last week’s news and come back next week for the following Friday Five Logistics News Roundup!