The health of the global economy will be the big story in 2012. I believe there is great likelihood the following three events will occur this year:
-- Carriers will terminate services and idle more ships as Ron Widdows, former CEO of NOL, stated at a recent apparel conference. The effect will be space and perhaps equipment shortages.
-- Maintaining market share appears to be more important to some carriers than increasing rates to generate profit or at least reduce the level of bottom-line loss, therefore, rates will continue to produce red ink for the carrier industry, particularly in the trans-Pacific and Asia-to-Europe trades. If rates remain low and demand suddenly increases, shippers will be stuck having to pay much higher rates to get space on ships after their minimum quantity commitments are met.
-- Some carriers may not survive the turbulence or may merge or align with other carriers to keep pace with the mega carriers, with the effect being short-term disruption to shippers.
There will be a need for more careful inventory management in 2012. GAP Stores said it plans “to keep inventories more lean in the coming year and use a ‘fast pipeline’ to respond to demand after seeing net profit fall back by a third on reduced sales in the company’s fiscal third quarter.”
Fast normally is another word for air freight, but there are many options in sea freight to expedite shipments and/or delay the final allocation of freight to stores. This may mean deploying or increasing the transloading or deconsolidation of ocean containers into 53-foot domestic containers or 53-foot wheeled trailers on the U.S. West Coast.
U.S. shippers with more than 75,000 TEUs are doing many innovative things to protect and accelerate their supply chains. However, innovation is not limited to the “Big Boys” of ocean shipping. It’s a state of mind that positions you to learn from others and apply the same principles to your business, enabling you to act bigger than you think you are. Ask questions and apply what you learn because 2012 will be unpredictable.