The party is over. Despite massive consolidation in the international steamship industry and rising fuel costs, importers and exporters still enjoyed historically low rates over the last year(s) and decent service. For 2019, I believe we are at a tipping point, partially driven by the major US trucking crisis and port congestion created by the mega-ships, and partially driven by carriers that will no longer tolerate the financial losses created by unsustainably low rates.
I quote Allen Clifford, executive vice president of Mediterranean Shipping Co., who recently spoke on a panel I moderated at a trade conference, “We are addicted to cheapness.” Virtually every commodity is paying rates that would be considered “wastepaper” levels. Shippers are realizing that they have to pay more, often double what they paid a year ago, for their inland delivery from a US port, but the ocean rates have not seen this kind of recovery.
My job is to work with the volume of our shippers and negotiate the best possible rates, but it is time for all of us to be realistic. If we want more than three carriers in business and enough truck drivers to fill the needs for deliveries, prices need to be aligned with operational costs and service fulfillment.
When we look at the typical articles on trends in the industry, many are focused on technology — IoT, AI, iPass, Blockchain, Digitization. All are very important and impactful on the logistics industry, but none of these technologies solve our basic operational problems that we experience every day.
Last year, I did write about the expectation of new technology as a transformational tool in our business This year, I am writing about getting back to basics. We cannot even get most carriers to produce an accurate service contract despite updated or new systems, much less figure out how to move a container inland within the free time allowed. We are tired of facing constant problems, and if it takes paying more to give the carriers and truckers the ability to improve service, I believe it is what we need to do.