The Hindu Business Line : No smooth sailing for shipping supply-chain

Apart from political risks, and unpredictable weather conditions, which can affect ship movement, cargo delays, non-availability of empties, strained industrial relations, and irregular sailing can cause disruptions in the shipping supply-chain.

SINGLE SOURCING, outsourcing, just-in time delivery and a host of other concepts are used freely these days as supply-chain management becomes increasingly important for businesses to ensure that customers can buy goods when and where they wish. The reason is simple: The disruptions and delays in the supply-chain can directly impact a company's profits. As companies increasingly source from different countries and global businesses need to route their products across the world, much of the focus of international logistics is, rightly, on shipping, terminal management and marine insurance.

The disruptions in shipping supply-chain can be caused by various factors which cannot always be anticipated. Apart from political risks, and unpredictable weather conditions, which can seriously affect ship movement, there can also be cargo delays, non-availability of empties, strained industrial relations, irregular sailing... The list can be long.

Increased lead time between production and shipments, often caused by poor equipment quality, discrepancies in product quality and tightening or slackening inventory controls are all crucial to shipping supply-chain. New adjustments may be needed to adapt to changing shipping patterns to keep the shipments moving. When shippers extend their businesses beyond their national frontiers, they must also manage the third-party logistics providers.

But, more important, the companies in their relentless pursuit of an ever-leaner supply-chain may often fail to account for these factors and find themselves with little room for manoeuvring when the disruptions occur. As some experts have observed, " exercising is good but too much of it and becoming too lean can have negative effects".

As container volumes grow at an astounding pace without a commensurate rise in the number of handling terminals, the management of existing facilities becomes critical, especially to avoid congestion and the consequent choking of the supply-chain. Delays at terminals can force shippers to exercise their choice in matter of selection of ports and routing of the shipments.

Terminals face a variety of problems such as improper stacking systems causing containers to idle on the pier, lack of adequate facilities for smooth ingress and egress of boxes due to poor connectivity either by rail or by road, questionable practices causing damage to containers, unsafe working conditions and so on.

In several US ports there is an additional problem: Of too many chassis cluttering the terminal grounds. In fact, many terminal operators wanting to get the best out of their facilities, prefer idle chassis to be stored outside the terminal premises. The problem arises primarily because the chassis have always been the responsibility of ocean liners. This is because container shipping is perceived as an extension of the trucking service. Also, many terminal operators, to woo the ocean liners, put in the position of storing and servicing chassis as part of the service they provide.

Many lines look to the semi-integrated model of Maersk-Sealand which controls its own ships, terminals, containers and logistics services.

Over the years some of the world's major shipping lines such as P&O, NYK Line, Yang Ming Line and Leif Hoegh (commonly known as Hoegh Line) have emerged as important terminal operators also. Even the Shipping Corporation of India had bid, unsuccessfully though, for cthe onstruction and operation of a container terminal at the Jawaharlal Nehru port. One major reason for this is the tendency among major container operators to order more and more mega ships of the capacity of 8,000 TEUs and above. It is felt that investing in mega ships without at the same time having control over terminal operation is a high-risk strategy.

Transportation insurers warn against the heightened risk profile of logistics operators saying that the growth in end-to-end logistics and the greater complexity of long-distance supply chains are increasing the risks of logistics operators in areas that are not properly understood. There is a need for evaluating carefully and professionally the risks involved in the new types of activities that are unfolding, with international logistics becoming more and more important. One wonders if the new breed of logistics operators is aware of its contract obligations.

The growth of outsourcing has signalled the arrival of logistics service providers with little knowledge and expertise in the new fields of activities. This is because people who worked as transporters or carriers of goods are now venturing into areas which are outside their traditional businesses. The transportation of goods by various modes has changed the risk perception as the logistics presupposes national and international carriage, warehousing and distribution and with it the obligations to be undertaken by a logistics service provider.

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