SHIPPING: Box Rate Volatility Raises Supply Chain Costs

Ocean freight rate volatility is ratcheting up global supply chain costs even when rates head downward, said a DHL Global Forwarding executive.

The “roller coaster” of slot supply and demand on mainline routes in recent years had “caused havoc” to supply chains, said David Goldberg, DHL’s senior vice president for ocean freight in the North Asia Pacific. Continual boom-bust doesn’t benefit lines or the buyers of their services who would prefer stability to allow better planning.

“The amount of management time and effort involved by DHL together with our customers does increase significantly for something which we don’t see bringing much benefit to the supply chain,” he said.

The overcapacity, lay-ups and slow steaming strategies of container lines in 2009 in response to a rates slump was followed by box shortages and cargo rollovers during the sharp rates spike of 2010. Another rate collapse has followed this year as new vessel capacity has swamped the container market.

More stable rates would allow third-party logistics providers and their customers to focus on finding supply chain savings through better container management, rather than focusing on seeking out port-to-port rate reductions, he added.

“Over the past several years we have seen freight rates at historic low levels and then within a very short period turn around to reach near historical high levels,” he said.

“We have now begun to see announcements again from carriers which talk about cancellation of services and potential new initiatives to return the supply/demand scenario to a more favorable picture for carriers as they once again fight for their survival.”


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