Ocean transport may change your supply chains

Roger OakdenSupply Chains & Supply Networks

The number of ships is reducing.

While the total capacity of container shipping continues to increase, it is through the introduction of larger ships, not having more ships. Does this situation have long term consequences for your supply chains?

Drewry Maritime Research recently identified that the number of containerships scrapped was about the same number as new ships. The critical figure is that most of the ships scrapped were under 5,000 TEU capacity and the new ships were more than 5,000 TEU capacity. Drewry expects this trend to continue.

This has implications for ports, inland transport and your supply chains. Port calls will be increasingly at fewer deep water ports  that can provide feeder services on ships under 5000 TEU, or by rail or road. There will also be reduced frequency of joint services at secondary ports by shipping alliances.

The number of port visits will be affected by the increasing number of consumers in developing and emerging countries. They will influence the development of new hubs for production and distribution that could affect traditional trade routes through a reduction in ships, as fewer ships are allocated to more routes.

The development of intermodal transport – the linking of sea, rail, air and road facilities, together with construction of the necessary dense trade clusters (e.g. inland ports, logistics cities) has been generally slow in the Asia Pacific region. The change in shipping services is likely to be the driver for intermodal development.

Change that you may experience

Coastal deep-water trans-shipment ports in Asia handling more than 10m TEU per annum will be hub cities; having the capability to provide for the region, a wide range of goods movements services, business services and finance. The end-point ports handing more than 4m TEU per annum will service their own hinterland and be feeder ports for smaller centres.

The Pacific region will require one port on the east coast of Australia and one on the north island of New Zealand. Both will service other coastal cities and Pacific Islands through feeder shipping, rail and road.

In both Asia and the Pacific, the mode of transport from trans-shipment and end-point ports will be selected by shippers on the transport distance to inventory trade-off. The challenge is that governments outside China and South Korea have generally ignored the importance of rail in the transport mix; investing mainly in road.

This may have been good policy with many ships calling at multiple ports, but with direct shipping restricted to a few ports, the reliance on road to move the containers will not be viable.

Change will take 10-15 years to happen, but too often businesses are reactive to change. Your business can be pro-active; consider the future challenges of fewer, larger containerships – where to buy from, locate production and distribution facilities and what mode(s) to use for distribution.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...