OPERATIONAL CHOKE POINTS

Without shipping, life would be different. We would have limited access to a lot of the food we eat, pharmaceuticals to heal, clothes we wear, and many more tangible products we consume. We do not run out of what we need simply because of shipping. At the time whiles, while the world stops, shipping keeps moving. People still shopped, and shipping kept proving. Crops that are weighed, cars that are sprayed, fruits and vegetables, toys and collectibles, and if the world is the heart, shipping is the arteries, and it is easy to see the impacts this makes.

However, despite the billions of products shipping secrete to grease the wheels of our lives, the waves of the covid-19 pandemic have caused many rough waters of operations in the shipping industry. Freight rates rising to their record high, high rate of blank sailings, scarceness of shipping containers, and numerous port congestions around the globe, especially among European, US, and Far East Asian ports amid the pandemic, continued to widen the gap of place utility. Even though there exists a trend of stable rate, especially among the transpacific shipping rate following the end of the peak ocean shipping season at the beginning of November. Ocean shipping rates still remain incredibly high at 8-9X more than the pre-pandemic norm.

The surge in freight rate did not pardon the developing regions of the world, such as Africa and Latin America, even though the increase in freight rate was main observed on the East-West trade routes. Trade routes such as china-West Africa or South America are long enough to require many ships to fulfill a weekly schedule. As such, thousands of containers get stuck on these ships amid a lack of return cargo, which fuels the high freight rate along with the china- West Africa trade routes. For this reason, an importer from Brazil or Ghana, or perhaps Nigeria, is not only paying for the stuffed container’s transport but also additional inventory holding cost for the empty containers stuck on the ship. Regarding developing economies, most of these countries are net importers of which Ghana and Nigeria are no exception.  This emphasizes how importers in these countries are suffering. These high freight rates are used to compute duties and taxes to worsen matters.

Carriers are now having a banquet of spiced shipping with a glass of screaming Eagle Cabernet. It may seem quite unfair to carriers with such a description, but is there any better way to describe the situation when carriers can get containers (despite the shortage) when shippers agree to add a couple of 100s of dollars to the freight rate (Premium booking, SEAPRIORITY go).

Grabbing the bull by the horn, the bull’s eye of the nightmare is the shortage of containers. Well, it is essential to note the simple reason for this outlandish episode is Containers are circulating much more slowly than usual. On average, a shipping container has a cycle time of 3 months between China and Europe. Currently, container cycle time is lengthier than the pre-pandemic norm. Containers are taking much longer to return to where they are most needed, causing a high displacement, not only among countries but also at ports within the same country. Bookings from some European ports take 14 days to receive confirmation. Simply, carriers want to confirm a high probability of equipment availability for a given schedule before confirming the booking. Congestion is causing containers to dwell at ports longer than expected, and its impact is felt by every individual on the planet.

Malcolm Forbes once said, “It’s so much easier to suggest solutions when you don’t know too much about the problem.” Exhaustive observation and analysis suggest the following as a potential medium-term to long-term resolution.

Revamping port handling systems

According to the new global Container Port Performance Index (CPPI) launched by the World Bank and data company IHS Markit, the Asian container ports have marked the highest efficiency scores in the world, dominating the top 50 positions of the global efficiency ranking. Detailing, the report scored ports against different metrics, making the efficiency ranking comparable around the globe by assessing and standardizing for different ship sizes and container moves per call. The Port of Yokohama in Japan was found to be the most efficient port in the world, with King Abdullah Port in Saudi Arabia and the Port of Qingdao in China also considered efficient. The Port of Algeciras in Spain was the highest-ranked European port. Mexico’s Lazaro Cardenas leads the Americas in 25th position, while the Port of Halifax in Canada was the only North American port in the top 50. The Port of Djibouti was the most efficient port in Africa, ranking at the world’s 61st position. Top performers take just 1.1 minutes to load or unload a container in a standard port call, while the average for equivalent workloads in underperforming ports is more than three times 3.6 minutes.

The gaps in port efficiency across the globe breed longer vessel waiting and container dwell times, port congestion, and eventually creating equipment displacement. Ports need to overhaul handling equipment, terminal management systems, labor force, and operational procedures, if not achieving the same level of efficiency, reducing the gap to improve the pace of equipment circulation.

Expanding port capacity

Developing high-quality and efficient container port infrastructure contributes to prosperous port operational growth strategies in developing and developed countries. Efficient ports also ensure business continuity and improve the resilience of the maritime gateways as crucial nodes in the global logistical system. Port expansion projects such as MPS terminal 3, revamping ports capacity in draft depth, berths, quayside and terminal handling equipment, terminal capacity(TEUs), and gate operations, among others, have significantly improved the performance of Tema port.  A productivity record of 139.91 moves per hour has been possible due to the port’s expanded capacity. Indeed, port capacity expansion facilitates quick turnaround time and quicker container circulation.

Enhancing logistics recruitment

Logistics recruitment is becoming increasingly difficult. You probably don’t know yet, but we are in the middle of a talent war in logistics and supply chain management. The transportation industry is working with a scarce pool of talent that is educated, knowledgeable, qualified, skilled, and willing to work. According to a survey conducted by PricewaterhouseCoopers (PWC), the largest professional services company in the world, logistics companies of all sizes are having issues recruiting talent. Finding candidates with a satisfactory skill set is a significant issue throughout the industry.

Transportation & Logistics 2030 Volume 5: Winning the Talent Race

Having a poor, unprofessional, less knowledgeable, unqualified logistics and supply chain staff is like cutting your own throat. If you have been observant enough, one will realize the logistics and supply chain industry has become a dumping site for unemployed entrants from other disciplines.  A logistics task is not performed because it is a job description but rather why it should be done. In other words, not because you have been told to perform a task but rather the consequences of your actions and inactions. High logistics cost than the industry average, business productivity suffering with swelling effect on profitability is the reward for recruiting inept. The disarray and lack of suitable information for effective decision-making engender is an immense contributor to the current state of the maritime supply chain. The industry needs professionals, highly trained and skilled staff, and people who appreciate their actions and inactions. Companies’ recruitment departments and recruitment agencies should be more scientific in their recruitment approach to avoid mis-hire.  This simple but powerful recruitment strategy’s effectiveness lies in the fact that organizations turn their best employees into recruiters, enabling a tap into a large pool of potential candidates. It is imperative to note that good, intelligent, and hardworking people like to surround themselves with like-minded individuals.

Overhauling port handling systems, expanding port capacity, and enhancing logistics recruitment requires a high level of commitment from authorities. The pandemic ruined the world at the most venerable point of health and supply chain systems, whiles we have bragged of the best for decades. Lessons drawn teach us to be the best based on current trends. It is a pill that won’t favor everyone but for the betterment of all. It is doable and not impossible, despite the self-interest resistances that anchor such evolutionary renovations.

Leave a Reply