Container lines told to work together in supply chain role

Haralambides pinpoints information exchange and co-operation as key elements

for continued growth, writes Phil Hastings

 

Container shipping lines need to better plan future capacity development if they want to expand their role as global supply chain managers rather than simply providing space for competitors such as non vessel operating common carriers and third party logistics providers. In that context, some of the latest ideas for future regulation of the liner shipping industry suggested by the European Liner Affairs Association earlier this year, notably that carriers should more freely exchange information about markets trends and trade volumes, could have a significant role to play.

 

Those, at least, are the views of Professor Hercules Haralambides, director of the Centre for Maritime Economics and Logistics in Rotterdam, the Netherlands, whose organisation acted as adviser to the European Commission’s Competition Directorate in an earlier re-evaluation of European Union Regulation 4056/86, which exempts liner conferences from anti-trust legislation.

 

The professor has previously publicly argued that carriers should be more careful about selling their slot capacity to NVOCCs and 3PLs on a wholesale basis and instead look to improve the utilisation of vessels through greater co-operation with each other, for example by further development of alliances.

 

He pointed out that the latest ELAA submission to the commission in June regarding future European regulation of liner conferences had included a number of references to the need for improved public exchange of information and greater consultation between all sectors of the industry. “I believe that better information exchange, as outlined in the ELAA’s revised proposals, will give each and every shipping line the opportunity to gain a better insight into market capacity requirements and plan their future slot development accordingly,” he said.

 

At the moment, argued Prof Haralambides, the global container shipping industry was building too much capacity.

 

The likelihood was that at some point in the future, depending on what happened to Chinese trade with the rest of the world, the industry would experience a glut of container slots, leading to falling rates and renewed pressure on carriers.

 

“My message to the lines is don’t build too much capacity, don’t build large ships you will never be able to fill without selling some space to NVOCCs and 3PLs, which are actually your competitors when it comes to managing supply chains,” he said.

 

“If you sell capacity to shipping line alliance partners or exchange slots with them, then fair enough. That is industry efficiency.

 

“That is the way it should be, but if you have to sell capacity wholesale to NVOCCs and 3PLs then that, in my opinion, is silly.”

 

Asked whether it was realistic to expect container shipping lines to treat NVOCCs and 3PLs as competitors for supply chain management business rather than as customers when it came to selling capacity, the professor agreed it would be hard for individual lines to adopt such an approach.

 

“It is easy to say that such a strategy makes sense but it would be very difficult to put into practice.

 

“Certainly, one carrier trying to do that on its own would be committing commercial suicide. All the carriers would need to do this together,” he said.

 

“That said, there are signs that lines are intensifying their efforts to compete more with NVOCCs and 3PLs in the overall supply chain by bundling together components and trying to differentiate their services.”

 

One of the keys to success for the lines in that context, though, reiterated Haralambides, would be improved management of capacity supply. “There is already some tacit consultation between alliance members when it comes to planning new capacity but I believe that trend will become more pronounced,” he argued.

Source: Lloyd's List