Staxxon International: A Breakthrough Idea that Could Transform the Industry

 

The box shipping industry has long been accused of lacking innovation. With the obvious exception of advancements in IT, the container shipping industry is pretty much the same today as it was in its infancy in the early 1960’s. So when  a company like Staxxon International comes out with foldable container technology, the industry ought to take notice.

As reported in this space last year, Staxxon has patented technology that allows five containers to fit into the space of a single box. This week Staxxon announced production of its foldable container in conjunction with SeaBox Inc. in East Riverton, NJ.

According to the announcement, the first containers produced at SeaBox will be used for “Convention for Safe Container testing, field testing at marine terminals and non-commercial sea trials.

The fact that a reputable company like SeaBox has taken on the project can be construed as evidence of the commercial potential of Staxxon’s technology. Make no mistake, these are early state production and trials. There is still a long way to go. But, the industry is in desperate need of this kind of innovation. And here are some reasons why.

1) Anemic U.S. Economy.  Sluggish growth in the U.S. economy due to high unemployment is impacting consumer spending. This coupled with a weak housing market has impacted import growth. Fewer imports mean fewer containers available for exports.

2) Low U.S. dollar.  The positive side of a low U.S. dollar against other currencies is the rising level of exports. According to the Journal of Commerce Exports are up 11% this year against imports at 5.4%. Again, a rise in exports mean demand for containers.

3) Container production. At the lowest point of the recession in 2009, global container production was at about 350,000 containers against the usual 4,000,000 the previous year. In 2010, container manufacturers stepped up production but not nearly enough to compensate for the demand in the recovery. As a result container shortages were rampant, mostly due to the cost/time of moving them to profitable, demand areas.  The ratio of containers to shipments is about 1.9:1, against  3:1 prior to the recession.

4) Ultra Large Container Ships. It’s not rocket science. Larger ships in service tie up more containers. This year, the Asia-Europe trade has seen 13,000 TEU + ships delivered into service, with other “smaller” ships cascading to other trades. Given the current order book, the trend will continue.

5) Export Demand in land locked areas. Import containers are generally delivered to large cities, while exports commodities are generally sourced from less populated areas. As a result, many areas are deficit of containers during peak demand times, generally in the fall through to the spring.

With the general trend in the U.S. of slowing imports and surging exports, there are bound to be problems getting containers where they need to be. Shippers are reluctant to pick up the cost of empty repositioning due mostly to the marginal nature of the commodities business, leaving carriers to pick up the tab for empty repositioning or de-selecting the business altogether, and sending containers back to Asia for the head haul trade.

Successful commercial implementation Staxxon’s technology would provide a wide-sweeping solution to many problems of container repositioning and significantly reduce carrier’s costs. . Imagine moving five containers on a rail car for the price of one. Or loading a ship where a single lift moves five empty boxes.   

Indeed, this is an idea whose time has come.

Why the Most Profitable Carriers are the Best Golfers

To the inexperienced it looks simple. Place the club in your hands, step up to the ball, swing the club back, and make contact. But anyone who has tried knows how difficult it can be to play Golf well. The mechanics of the swing are precise. Grip, stance, backswing, contact, all have to be consistently perfect, even for an average golfer to attain par. Elite golfers swing the club about 70 times in one 18 hole round. And the golfer’s swing must be the same every time. Even the slightest change in grip, stance or backswing will hook or slice the ball. Slight adjustments are often necessary in adverse weather conditions and changes in terrain. The best golfers in the world have the skills necessary to recover from just about any mistake. They practise hours every day. The difference between the number one and number 15 golfer in the world can be subtle, yet complex. That difference equates to millions of dollars a year in prize and endorsement money.

To the inexperienced observer, container shipping looks simple. Load a box, deliver it to the terminal, load it on the ship, transport from point A to point B, unload the box, and deliver to consignee. But those who have spent some time on the inside of a global container carrier understand how difficult it can be to effectively manage it properly and profitably.

Network design, Cargo mix and selection, contract negotiation and filing, equipment control, booking data, electronic data exchange, advanced cargo manifests, documentation, and billing (to name just a few) must be perfect to execute the booking and load the container on the intended ship. Today’s global carriers accept millions of bookings each year. They make adjustments for refrigerated and hazardous cargo. They need to have the processes in place to recover from cargo which has been incorrectly shipped, rolled, or delayed in a transhipment port. Even the most subtle differences between number one and number 15 in the world can be significant. Often it is the difference between making, and losing hundreds of millions of dollars.

Comparison of number one through 15 carriers is featured in this month’s article in American Shipper entitled the Big Rebound, Who’s Making Money 2011 by Eric Johnson. The article weighs profitability of the top 15 publicly traded shipping lines from 2006 to 2010. It then takes 2009 losses adds 2010 gains  and compares that with profits and losses each year between 2006 and 2010.

Four carriers showed a profit when 2010 and 2009 were combined – AP Moller Maersk, OOCL, China Shipping and Evergreen.  At 14.9% OOCL’s profit margin was best, followed by China Shipping (12.4%), Yang Ming (12.4%) Maersk and Hyundai both at 11.7% and Evergreen at 11.6%.  In a combination of earnings from 2006 through 2010, no less than 10 carriers came out in the black. However, when comparing profits of 2006 through 2009 a much different picture emerges.

In this case, only K-Line, OOCL, Hyundai and NOL/APL were in the black. K-Line’s profit numbers are tempered by the fact that 2006 – 2008 results included both bulk, and car carrier sectors. The clear and consistent winners were OOCL and Hyundai. CSAV, Zim and Japanese carriers MOL and NYK posted the worst results during the same period.

So what exactly does OOCL, and to a lesser extent Hyundai do differently than the other carriers outside the big three? (Maersk, MSC and CMA-CGM) Moreover, what makes CSAV the worst in profit margin?  Why is OOCL’s swing better than so many others?

OOCL’s superior performance is not limited to the last five years. In fact, OOCL has had only one loss making year (2009) from 2001 through 2010. What makes OOCL’s performance even better is that their profit per TEU is consistently better. No less than nine carriers booked average revenue per TEU in 2010 better than OOCL, yet the carrier was third in average profit per TEU at $188, surpassed only by Hyundai and AP Moller-Maersk. In 2009, the bleakest year in the history of the box industry, OOCL lost an average of $78 per TEU, bested only by Evergreen Marine Corp at $75.

Such consistent performance can be attributable to good leadership, superior processes, well trained staff, and, last but not least, top-of-the-line systems. OOCL’s 2010 Annual Report describes IT as follows:

“Our IT gives us visibility of full shipment cycles, enabling us to take prompt action on operational variations and to exploit downstream opportunities…Moreover, our information systems have developed into a common platform for collaboration and innovation. “

It has long been recognized that OOCL’s systems are some of the best, if not the best, in the industry. OOCL’s ability to squeeze profit where others cannot is a direct result of their investment in systems development and training. The machine is rich with data much more accurate than competitors, giving them the ability to make the right decisions on cargo mix and selection.

Compare OOCL to CSAV, the most unprofitable carrier in the group of 15 from 2006 to 2010. In their annual report CSAV says this of their systems:

“Contributions have become an essential element in the evaluation of business and sales management. Priority was there for given to improving the timing and quality of the entry of costs in the contribution system. .. starting in the second half control began of the quality of information in the contributions system. “

Ultimately, trade managers are judged by the contribution and volume of business they can deliver to the line. They rely on good contribution management systems to make the thousands of decisions each day on which cargo to carry and which to refuse. By their admission in a record profit year, CSAV admits to having to control the quality of information in their contribution system. OOCL, meanwhile, working with accurate data simply makes more informed business decisions.  Not only does OOCL have a better swing, they are also playing with a better set of golf clubs.

Container shipping is indeed complex. The execution of a single booking requires perfect input of data, coordination with terminals, customs authorities and container yards, and prompt accurate documentation.

Comparing container shipping to ordering on Amazon, or booking a flight, is a dangerous oversimplification. Like the golf swing, perfecting subtle, complex elements is what separates the champion from the rest of the field.

MSC vs Maersk: What Would Darwin Say?

Globalization is Darwinian. As the world becomes increasingly smaller and businesses expand to new markets, there are clear winners and losers; the cost of the free market.

For years container shipping was partially protected from free market forces by way of conferences. The conference system allowed carriers to discuss aggregate supply, general pricing, surcharges and policy in a particular trade. Carriers used service to differentiate themselves from competitors. Shippers and forwarders alike expected completely different levels of service from conference and non-conference carriers. Cargo was not priced on a simple box from point A to point B basis, but by commodity. Transpacific Westbound cargo, for example, was by rated commodity, generally on a weight or measure basis. Way back in the 80’s a 20′ refrigerated container of herring row from Vancouver to Japan was priced on a per pail basis. Niche, or startup carriers, were able to thrive as independents in the conference system by pricing slightly below conference levels, shaving off thin slices of market share.

What is typical in many industries (without conference protection) today is the sheer dominance by two or three global players. Apple and Microsoft. Anglo American and Rio Tinto in Mining. Toyota and General Motors. In the box industry, Maersk and MSC.

These companies lead all aspects of their industries, not the least of which is product development, and pricing. Like Avis in the old car rental commercials, companies in the number two position try harder. Number two’s have but one goal: become number one. The fight for the number one position in the container shipping industry, long-held by Maersk line has arguably led to the rapid decline in freight rates in major shipping trades.

In the depths of the Great Recession in late 2009, carriers removed tonnage from service on an unprecidented scale. At its peak over 12% of the global fleet  was idled. As a result, heavy losses of 2009 turned to record industry profits in 2010. In contrast, MSC chose a much different strategy.

While competitors were laying up tonnage, MSC took on more, taking advantage of record low charter rates. MSC grew market share in 2008, 09 and 10. The following two charts in the USA trades illustrate their ascension. Charts show the total laden throughput in TEU both import and export for the top 15 container carriers.

USA IMPORT TOP 15 CARRIERS SOURCE JOC 2010 2009 2008

USA EXPORT TOP 15 CARRIERS SOURCE JOC 2010 2009 2008

What is most interesting is that MSC gained market share throughout the recession, indicating a clear strategic decision to grow business, while other carriers were pulling back. When the market did finally turn in 2010, MSC was poised to take advantage of the surge in demand due to re-stocking simply by having more capacity available than competitors. The strategy allowed MSC to grow not only in the major trades, but also in the North-South trades where they have traditionally been strong.

Maersk (among others, of course) in contrast responded to the recession by removing capacity, slow steaming (de-facto reduction of tonnage) and de-selecting cargo. Given its sheer size, Maersk stood to lose the most. An argument could be easily made that other carriers would not have removed capacity from the market if it wasn’t for Maersk’s lead. Number One comes with a price. In this case, Maersk’s signal to the market that it was going to remove tonnage was followed by all major carriers with the exception of MSC.

In response, post recession, Maersk has become aggressive. This year’s announcement of 10 x 18,000 TEU ships on order was a clear signal to the market that Maersk was not letting their leadership position go without a fight. New tonnage in the market was deployed immediately – mostly in Asia-Europe – and rates began their precipitous fall. Asia-Europe rates are down some 40% since their peak in Q4 last year. Due to the corresponding rise in the price of fuel, many believe a port to port box move no longer covers fixed and variable costs.

On the Transpacific head haul trade, scheduled General Rate Increases and Peak Season Surcharges have been postponed. Back haul trades are faring much worse, with rates plummeting and the anticipated box shortage failing to materialize.

Like two heavyweight prize fighters, MSC and Maersk continue to exchange blows for market share. Meanwhile, with few exceptions, the rest of the global carriers react by either adopting the same strategies , or reducing their exposure to the business. Judging by the current order book, Cosco, Evergreen, CMA-CGM and APL have adopted aggressive growth strategies. Although, Evergreen is playing catch up having no ships on order in 2008 prior to the recession. NYK, MOL and Hyundai on the other hand have few ships on order, and appear to remain on the sidelines in the capacity race.

As global demand cannot keep up with supply and in the absence of a conference system, ships are displaced to other trades which in turn become over subscribed. The Intra-Asia trade, for example, has long been dominated by niche players running 800 -1500 TEU ships between small ports in Malaysia, Indonesia and Vietnam to name a few. Historically, global carriers have left the trade to niche players like Thailand based Regional Container Lines.  Since the invasion of global carriers into the trade recently, RCL has yet to recover from the recession.

Publicly traded on the Thailand Exchange RCL stock price is currently at 7.70 THB down from its 52 week high in September of over 17.80 THB. Naturally 2009 was a loss. So, however, was 2010 with an operating loss of USD 6.7m against revenue of USD 499.5m. Compare this to 2007 and 2008 when RCL’s revenue was USD 647.5m and USD 641.0m respectively. Taking an ” if you can’t beat ’em, join ’em” approach, RCL announced a joint service with heavy weight Hapag Lloyd in March of this year.

With the exception of carriers protected by cabotage rules, the age of the niche carrier is quickly coming to an end. This is no more prevalent than in fast-growing South East Asia. What was once served by smaller carriers is becoming the domain of the big boys.

The fight for market share above profits between the industry’s two largest players will have an effect on all carriers. Some clearly will not survive. Is this the year we finally see some much-needed consolidation in the industry? If regulatory bodies can abolish conferences, should they be able to reject mergers and acquisitions? Under current conditions such stringent policies appear to  undermine the natural order of things.

(Note:  This article was also published in the July edition of Maritme Gateway. www.maritmegateway.com)

 

Vancouver Riots and International Business

Long before the mass global acceptance of the world-wide web, those privileged few of us plying our trade in the international arena of business, have played in some small part the role of ambassador for our countries. In my early years in the industry, correspondence by telex, fax, then something called email from  people in far away countries like Taiwan, Japan and Malaysia was fascinating.  Better yet was the occasional opportunity to meet with people from other countries. Discussions were not limited to business opportunites. As these relationships developed topics of discussion included traditions and cultures in each other’s countries. There really is no better way to learn than in the personal context of a face-to-face meeting.  I reflected on those  personal business connections I have made over the years often this week in the aftermath of the embarrassing riots in Vancouver following hockey’s Stanley Cup final.

By now, thousands of images have been posted by both mainstream and social media in a story that has been headline news around the world. With the political strife in the Middle East, the earthquakes in Japan and New Zealand, along with other natural disasters everywhere, how can Canadians who appear to have everything seek to destroy the downtown core of one of the world’s most livable cities in such a senseless manner? How can anyone explain the riot to someone from a country with abject poverty, or with limited or no democracy? Many of us in international business have long relationships with people from all over the world.

I recall a dinner I had once with a colleague from Beijing way back in 1998. We were dining in a restaurant in Toronto. He had travelled to Los Angeles, Chicago and New York before making his last stop in Toronto before returning to China. It was his first trip to North America. What struck him most was the sheer size of homes in North America. The average home he said would have housed several families in China back then. He said we were lucky to be living in a place with so much to offer for so many.

Years later on a trip to Japan, I was sitting with a group of colleagues and customers in a restaurant. One colleague asked me about Canada. He was most interested in so many cultures living in the same country. When I explained to him that Canada has immigrants from almost every country in the world, he turned to me looking quite perplexed and asked “How do you make that work?” The answer to is, of course, that we don’t really know. Yet somehow it does.

Businesses in Canada are generally well received in other countries. Canadian business people are reputed to be open, honest, and diplomatic. Thanks to an open trade policy, doing business with Canada is relatively easy. Canada is one of the least corrupt countries in the world, ranking sixth among 178 countries by Transparency International.

As a Canadian businessman in the international arena, I have always been proud to hear the favourable impressions of Canada. Sharing knowledge of the Canadian market with friends around the world, which in some way allows them to succeed in Canada gives me great satisfaction.

In the coming weeks, Canadian business people will be asked by colleagues and customers from all over world their opinion of the night of the Stanley Cup Riot in Vancouver. WHY did it happen? Many will offer through embarrassment or anger many seemingly logical explanations:  drunkenness,  a handful of trouble makers starting the whole thing, social media, etc., etc.

The truth is we don’t know. We don’t know why in one of the greatest countries in the world people would willingly destroy a great city for no reason other than that they lost a hockey game. Those of us in international business have a much different view of the world.

We recognize how lucky we are to live in Canada. We hear it from colleagues and customers from all parts of the world. We have seen and heard how difficult life can be for so many people in developing countries with which we do business every day. It is thanks to these experiences we, in the international business community, have learned to take none of what we have for granted.

It is a shame that those delinquents in Vancouver can’t see the world as we do.

America’s Top Carriers: MSC’s Closes Gap on No. 1 Maersk

The Journal of Commerce recently published a report of the top 40 container carriers in the U.S. Container Shipping Canada exptrapolated the top 15 carriers in the report and ran a comparison between years 2010, 2009 and 2008. Both Import and Export charts are listed below.

MSC are far and away market share winners in the past three years. In fact, of all carriers in the top 15, only MSC increased laden throughput in recession year 2009 compared to 2008, in both Exports and Imports.

MSC’s agressive growth strategy has arguably led the freight rate race to the bottom in the Box Industry in 2011. Seems it is only a matter of time before MSC takes over the number one position from Maersk.

USA IMPORT TOP 15 CARRIERS SOURCE JOC 2010 2009 2008

USA EXPORT TOP 15 CARRIERS SOURCE JOC 2010 2009 2008

Poor Service and Container Shipping

It’s a common complaint as old as business itself, but in the container shipping business the criticism has become much more audible in the last decade. What is it? What shippers grouse about most is poor customer service and a lack of understanding on the part of the carriers of their businesses. “Carriers are not partners” they say. In fairness, not all carriers are equally guilty.

Several, if not all, of the top 20 global carriers  have good long-term business relationships. These customers, however, tend to be those who ship in the thousands, if not hundreds of thousands of TEU per year. They are assigned the most competent sales executives and are given a clear path to liner executives should something go wrong. But most of the world of shipping isn’t played by Walmart, Toyota, or General Motors.

The bulk of shippers deal in hundreds or perhaps a few thousand TEU per year. These small and medium-sized businesses are the backbone of most economies. Yet they have increasingly had little respect from carriers, who either cannot, or will not service them.

An obvious reason is the increase in size of carriers and the almost complete annhiliation of niche carriers. In 1998, P&O Nedlloyd purchased Blue Star Line. During the amalgamation of the two companies, it was apparent that Blue Star serviced smaller accounts much differently than P&O Nedlloyd. Granted the Australia-New Zealand trade lane was quite small. However, clients with 20 TEU per year were visited at least once per month, invited to all industry functions, and taken out to lunch on a regular basis. Money was of little importance in a niche trade where the margins per teu were exceptionally high.

What was even more interesting was the level of autonomy given to  sales executives at Blue Star. They had very little reporting, had smallish territories and the outcome was much more important than their behaviour.

Outcome systems (OC) and Behaviour Systems (BC) is the subject of a paper written in the Harvard Business Review (6/29/2006). The article provides insight as to why some companies service customers better than others. OC and BC systems are sales management theories operating at each end of the spectrum.

Companies with outcome control systems reward results, or the outcomes of the sales reps interactions with customers. The customer is king. Typically in OC systems, the sales representative’s compensation is determined by the customer’s behaviour. Sales people are also given considerable autonomy in OC systems, and place importance on pleasing their customers rather than pleasing their managers.

In companies with Behaviour Control systems, the manager is king. Managers reward what sales people bring to the job, and measure what they actually do – activities, hours, expenses, etc. BC systems measure sales people’s knowledge, skills and competencies. They are measured on several criteria, many of which are subjective. The bulk of their compensation is tied to salaries with bonuses tied to attitudes, behaviours, and competencies that management values. Clearly in BC systems someone is watching outcomes, but it is not the only thing that gets compensation.

OC and BC systems are at the extremes, most companies will fall somewhere in the middle with many leaning one way or the other. In the container shipping industry, there are carriers who are “much easier to deal with” than others. These tend to be those who are more focussed on the outcome. Those which are more difficult tend to focus on behaviours, are internally focussed.

Fast forward to 2006, large global carrier X is purchased by even larger global carrier Y. Carrier X is almost completely outcome focussed. Customer is king. The Senior Vice President of Sales doesn’t want sales people spending time on sales reports. “Just go out and get the business” he says. Sales people have autonomy, and can even make some pricing decisions.

Carrier Y is almost polar opposite to Carrier X. Carrier Y’s sales force has several reports to file each week. Sales Management is king. The primary goal of the sales executives is not of customer outcomes, but to feed information upward in the organization. Outcomes are not as important as behaviours and competencies are rewarded over performance. Reps have very little autonomy.

While both examples above are true, the reality for most carriers is the struggle between OC and BC systems. The sheer size of  investment of hard assets in the containers shipping industry necessitates the use of BC systems. Outcome control systems fit best when sales people have “a substantial influence on results. Sales force elasticity is high (changing…. sales people would have a big effect on results)”

What has been demonstrated in the container shipping industry, time and time again, is that changing a sales rep, makes very little difference on the outcome. Customers continue to support the carrier providing the schedule reliability, container availability and, of course, pricing is right.

Without a doubt, carriers leaning a little more towards outcome control are much easier to deal with, and their sales executives tend to be, well, happier. However, in the price sensitive world of container shipping BC systems are crucial. Long ago, shippers made their choices based mostly on cost alone. Carriers adjusted their business models to fit that choice.

Are Carriers Guilty of Collusion?

As EU officials raid offices of major container carriers this week as part of a major antitrust investigation, one can only wonder how far out of touch the EU competition bureaucracy is from the real world. After collectively losing $20 billion in 2009, then soaring to a record $15 billing in 2010, 2011 looks like another losing season for the industry.

Hapag-Lloyd, APL, Hanjin, to name a few, have all reported losses in the first quarter of this year. If carriers are indeed colluding on prices, and moreover capacity, they’re awfully bad at it. OPEC this is not.

EU officials are likely responding (what took you so long boys?) to wide-spread vessel layups in late 2009, which contributed to record profits in 2010. Evidence of carriers were in cahoots, however, will be difficult to prove. The world in 2009 was bleak.

Thanks largely to the spreading contagian of the financial meltdown in the US, the global economy in 2009 was abysmal. Demand for container shipping shrunk in 2009 for the first time in the history of the container shipping business, which has come to rely on seven to 10 percent growth rates to support massive investment in larger, and larger ships. Put in simple Econ 101 terms, the demand curve shifted to the right.

Shipping is no different than any other industry when it comes to the basics of economics. An argument can be made that in the absence of conferences, container shipping is much more prone to the will of the free market than ever. As “Great Recession” wore in in 2009, there was very little evidence the U.S. or European economies would recover quickly.

Several economists correctly predicted that the recovery would be slow, job growth enemic, and much important consumer demand in negative territory for the foreseeable future. As losses mounted at an alarming rate, individual carriers had a decision to make. As many (not all) decided to remove capacity from the market, supply shifted in line with demand, and prices stabilized.

Even the most seasoned economists did not predict the subsequent surge in demand in early 2010 due to re-stocking. At the time, carriers hesitated to abruptly deploy laid up tonnage as most of the experts predicted the surge would be short lived, perhaps due to the run up prior to Chinese New Year. Of course later that year, the recovery in container shipping was in full swing and carriers slowly re-deployed tonnage. Can carriers be blamed for being cautious?

Record losses in 2009 led to the near collapse of several carriers. The fact that all of them survived is probably an indication of a lack of confidence in the investment community rather than the carriers’ strength to survive.

This year is on pace to set another record  in volume for container shipping. Ports around the world are reporting sharp increases in the first quarter over 2010. While carriers register record revenue and volume with accompanying losses, idle container ships currently stand at 0.9% of global fleet capacity with most laid up ships in the sub 2000 TEU range. Dozens of Ultra-Large Container Ships above 13,000 TEU are due to be delivered this year.

These ships are being deployed on the Asia-Europe trade, thereby cascading their “smaller” sisters to the transpacific and other trades. Rates have been falling since the fourth quarter of last year.  Experts are predicting losses to come close to 2009 levels.

Does this look like a cartel?

How will the Port of Vancouver handle the bottlenecks in 2011 peak?

In an interview at last week’s TPM in Los Angelas, Port of Seattle CEO, Tay Yoshitani commended Canadian Ports for the way they work together with government and other stakeholders. No doubt, Mr. Yoshitani was referring mostly to the Port of Metro Vancouver, which for years now has successfully taken freight destined for the U.S. midwest from the ports of Seattle and Tacoma.

Vancouver’s container ports have been the model of growth for years reaching 2.5 million TEU in 2010 up 17% from 2009’s low base year and marginally better than 2008’s 2.49 million. Better yet is the fact that Vancouver’s container throughput is up over 14% in the first two months of this year over the same period in 2010.  At the current pace, the port of metro Vancouver will handle approximately 2.85 million TEU in 2011, which, of course, would set a new single year record. The question is:  how will the terminals handle the surge in volume without creating bottlenecks?

Most of us in this industry have painful memories of 2006, and 2007 when import boxes destined for densely populated areas of Toronto and Montreal sat at terminals for 7, 14 and in extreme cases 21 days during peak season. Terminal operators pointed fingers at rail partners Canadian National and Canadian Pacific for their lack of available equipment. CN and CP in turn pointed fingers back at the terminals for inefficient loading schedules, and simply not clearly defining their equipment needs. Importers absorbed additional costs of moving grounded boxes at ports to off terminal rail sites. These generally included a local trucking charge, plus any shifting costs at the terminal for getting to specific boxes.

In some cases, containers were so deeply buried under other boxes that the terminals flatly refused to pull them out. Lines, of course, passed all costs along to shippers. Some of the more desperate shippers would truck container the entire 4492 kilometres to Toronto at more than double the cost of the ocean freight from Asia to Vancouver. And there simply isn’t an index-linked or freight derivative contract in the world that will mitigate that cost.

Congestion problems in Vancouver, and no doubt other ports, are a clear illustration that a freight price is not a commoditized box price from point A to point B. Shipping is complicated.

In Vancouver alone, there are two terminals in the inner harbour (Vanterm and Centerm), along with Delta port, and to a lesser extent for containers Fraser Surrey Docks. During times of congestion, not all of these will be backed up exactly the same way at the same time. There are two rail service providers. Sometimes one will be able to provide railcars more efficiently than the other. Container carriers usually contract with only one rail carrier, although some of the larger ones will  use both. (CN and CP, generally stay away from each other’s business, but that’s a story for another day.)

So what is a shipper to do?

1) Don’t throw all your eggs in one basket. Yes, this is a cliche, but while many shippers will spread their traffic around to four or five shipping lines, it is tempting for some to take two low priced carriers for the sake of cutting costs.  How many shippers ensure their cargo spread to different terminals? How many spread cargo between carriers supporting CN and carriers supporting CP Rail?

2) Do not select the carrier on price alone. This year especially, shippers will be looking to make back what was charged in 2010 by putting the squeeze on carriers. Rates are currently down more than 35% from last year’s peak. While price is a very important consideration,  what is more important is for shippers to understand why one carrier is selected over the other based on service, and terminal diversification strategy.

3) Use a port diversification strategy. The logical choice for shippers with cargo destined to Eastern Canada is to use Prince Rupert. This may not fit some service schedules, however, it is worth examination as a strategy.  In 2006, a shipper in Eastern Canada was routing cargo over Los Angelas, at a premium of $2500 just to avoid Vancouver which was a complete mess. This may not be for everyone, and there are only a few carriers providing the service, but it may be worth a look.

4) Communicate, communicate, communicate. Shipping Lines, terminals and railroads like nice steady even volumes year-round. But business simply does not work that way. Shippers should be giving their nominated carriers plenty of advance notice on fluctuating volumes. This is not only for the sake of securing containers and vessel space (which should not be a problem this year), but, the carriers should have an open dialogue with the terminals and railroad, so that equipment and yards can be planned well in advance. Stay away from carriers who do not want to micromanage your volumes.

Carriers managing volumes at source loading ports are the ones who will have fewer problems with bottlenecks simply because they will pass those volumes along to terminal and rail service providers, leaving what ought to be sufficient time to plan equipment needs.

With Vancouver on pace for a record year in container throughput, let’s hope for the sake of shippers they will handle the surge.

Finding a Job in Shipping – Part 1 (Supplement)

Kevin Buckley of Buckley Search Inc.,  was kind enough to respond to our last post on Finding a Job in Shipping in Canada.

Kevin wrote:

Your readers may benefit from a few resources we have put together for newcomers

as well as local residents:

http://freightcustoms.com – links to job boards and hundreds of employers

http://buckleysearch.com/job.htm – organizing your job search

http://kevinbuckleycpc.com – our published and un-published articles on job search based on 30y experience

http://jobsearchguide.ca – our general Canadian job search guide – recommended by the Riley Guide

http://buckleysearch.com/education.htm – educational programs offered in the industry

 

These links are packed with information which should help newcomers find work in Canada.

Thank you Kevin for sharing this with us.

Finding a Job in Shipping in Canada – Part I

Every year about 250, 000 people from all corners of the world make Canada their new home. Canada’a ageing baby boomer population and low birth rate makes necessary an open immigration policy to support the growing number of retirees collecting government funded old age pensions.

These new Canadians contribute  to the economy, culture and melting pot that is Canada.  Many have professional backgrounds in international trade and shipping, adding value to Canadian companies with their inter-country contacts and broad knowledge. Some have an easy time finding work in their fields. Yet others face challenges finding appropriate work to match their skills. This series of articles will explore the shipping industry landscape in Canada, and hopefully give guidance to new residents to find a career job.

In my  experience as a manager for major container shipping lines in Vancouver, Toronto and Montreal, I hired many new residents into their first jobs in Canada. Here are a few points which in my experience will facilitate your job search.

1) It’s not what you know, but who you know

Networking and contacts are vitally important when searching for a job. If your current company has a Canadian organziation or agent, get as much information as you can about who is responsible for hiring.  If possible get a manager in your current company to write a letter of recommendation. As Customer Service Manager in Toronto, I hired four people  in Toronto simply because they came with a background in the company.

2) Be willing to accept a lower level position to start

Many new immigrants come to Canada with excellent credentials and work experience; some in senior management. Unfortunately, most new residents do not attain the equivalent position in Canada until they get some Canadian work experience. Be aware that for lower or entry level positions some potential employers may consider you to be over qualified, and, thus, not willing to do the job long term.

3)  Set up information gathering meetings with potential employers

Call potential employers, introduce yourself and tell them that as you are new to the Canada, you would like to meet with them to learn about the industry in Canada. Let them know the meeting will be short – no more than 15 minutes. Most managers will be open to this. If you present yourself well and ask relevant questions about the industy, the person you’re talking to will not only get a favourable impression, but might refer you to someone who might be hiring. Every meeting with potential employer, even if it’s not a job interview, is one step closer to getting a job.

4) Join local industry associations

Every city in Canada has a local transportation or traffic club which hold industry events. These are good opportunties to meet people in the industry in an informal setting.

5)  Sharpen your interview skills

Be ready to talk about your successes in your last job and how you contributed to the bottom line of the company. Practice to be sure you can describe in about two minutes what you have done in the past which would help the company you would like to work for. Give specific examples. There are several examples on how to be prepared for an interview on the internet. Do some research and practice.

Good luck.

Next post – Shipping Industry job market in the major cities in Canada.

If you have any questions, or comments, please feel free to reply back to this post.