transportationreport MARITIME/PORTS
IT’S ALL RELATIVE
Defining slow-steaming is a subjective exercise. Curtis D.
Spencer, president of IMS Worldwide Inc., a Webster, Texas-based consultancy, puts the typical slow steam speed at
between 11 and 13 knots. Theodore Prince, who runs a
Richmond, Va.-based maritime consultancy bearing his
name, pegs the average speed of the world’s liner ships at
about 15 knots, adding that some companies may have their
vessels steaming as slow as 12 knots.
Maersk Line, the world’s largest liner operator, said its
ships sail, on average, at 17 knots. The carrier may bring
speeds down more in the future, however.
A spokesman at Maersk’s Copenhagen
headquarters said the company is “
continuously reviewing whether our network can
be optimized further. This also includes
considerations of reducing speed further.”
The disparities in definitions aside,
today’s speeds are significantly slower
than the 19 to 22 knots that modern-day
vessels can steam when pushing full bore.
To put it in historical perspective, the fast “clipper ships” of
the 19th century sailed at a top speed of about 16 knots.
Slower speeds mean longer transit times. In 2000, a vessel
sailing from Shanghai to Los Angeles generally arrived in 15
days, according to IMS data. Today, at the slower speeds, the
time in transit is 17 days. The lengthened transit times are
more pronounced at East Coast ports. In 2000, the same
vessel bound for Savannah, Ga.; Charleston, S.C.; Norfolk,
Va.; and New York would arrive in 29 days after transiting
the Panama Canal. Today, the transit times are 35 days to
Savannah and Charleston, and 36 days to Norfolk and New
York, IMS said.
Prince said the longer transit times lend credence to his
view that the expanded Panama Canal will result in little
cargo diversion from West Coast to East Coast ports when
the canal opens in 2014. Prince has long argued that shippers and Beneficial Cargo Owners (BCOs) won’t achieve
sufficient cost savings from an all-water route through the
canal to justify the longer sailing times when compared
with offloading cargo on the West Coast and trans-loading
to rail for the inland move.
“Slow-steaming has just widened the discrepancy” in
time between the coasts, he said. “The railroads haven’t
slowed down.”
For shippers and BCOs, the slow-steaming numbers have
real-world impact. If an importer engages in a “Free on
Board” transaction, where responsibility for the goods,
including transportation, insurance, and inventory costs,
passes to the buyer once the cargo is tendered to the carri-
er, a longer voyage could mean additional inventory carry-
ing costs. Slow-steaming also complicates a company’s abil-
ity to react to unexpected events, such as bad weather or a
labor disruption, which could affect product flow. In addi-
tion, slower speeds can trigger changes in ordering, pro-
duction, and scheduling as companies adjust to filling any
holes in inventory if the goods are still on the water rather
than in a DC or with their customer.
OFFSETTING THE IMPACT
NCR Corp., a global technology company based in Duluth,
Ga., attempts to pre-position its inventory whenever practicable to mitigate the impact of slow-steaming. Michael
Chandler, NCR’s vice president, customer fulfillment-glob-al operations, said the company, which generally builds to
order and not to stock, will pre-build automated teller
machines in Asia prior to the placement of
a purchase order and have them shipped
to the company’s Atlanta warehouse so
they are available when the customer
wants them. NCR’s longstanding customer relationships allay any concerns it
will be left holding the bag prior to the
signing of a formal order agreement,
Chandler said.
To offset the impact of slow-steaming,
NCR will sometimes intercept shipments arriving on the
West Coast before they can be trans-loaded to a railhead and
have them moved inland by truck for faster delivery. The
company will, at times, also instruct its 3PLs to handle the
truck delivery direct to customers. But both options are
costlier than shipping inland by rail, and the latter raises visibility and security issues because it could compromise
NCR’s product tracking capabilities, Chandler said. In rare
instances, Chandler said NCR will have to ship a machine to
its destination by air, the most expensive alternative of all.
As much as NCR tries to mitigate the effects of slow-steaming, there will always be pockets of vulnerability,
according to Chandler. “We have to take an inventory risk
somewhere in the supply chain,” he said.
Mike Orr, senior vice president, operations and logistics
for vehicle parts giant Genuine Parts Co., said his company
has yet to experience any adverse impact on its business as
a result of slow-steaming. Yet Orr is more concerned about
the future than the present. “We … execute to ‘high velocity’ flow through our supply chain,” he said in an e-mailed
statement. “Having a key link intentionally slow down is a
concern.”
MUCH ADO ABOUT NOTHING?
Not everyone is worried, however. Spencer of IMS
Worldwide said businesses flooded their pipelines with
inventory during a six- to nine-month period in 2010 in
reaction to the slower speeds. The inventory backfill has
long been completed, and networks now are “in equilibrium,” he said.
Mark Holifield, senior vice president of supply chain for
The Home Depot Inc., said he pays little heed to steaming
speeds because ocean freight is inherently slow and a couple of days of voyage variability mean nothing.
