MARCH 23, 2017
LLOYD’S LOADING LIST: MANAGING THE IMPACT OF THE OCEAN ALLIANCE CHANGES
CargoSmart’s chief commercial officer shares his expertise to help you prepare and gain the most benefits from the new alliance networks.
The ocean container transportation industry has experienced significant changes. In 2016, the top 20 ocean carriers consolidated down to 14 top ocean carriers and the four major carrier alliances reorganised into three major alliances. In April of this year, the new OCEAN Alliance and THE Alliance will kick-off their respective networks and the 2M Alliance will launch new services.
The carrier and alliance changes are causing tremendous adjustments to the services that are available for shippers and forwarders. Are you prepared for these changes? We analysed the three mega alliances’ services announced through 15 March 2017, and identified key changes in the transit times and route options. Based on our findings, we have compiled three ways to help you prepare and gain the most benefits from the upcoming alliance changes.
1) Take advantage of much faster and longer route options
When we analysed the direct routes that the OCEAN and THE alliances will offer starting in April, compared to the alliance services their member carriers offered before April, we found that for the trans-Atlantic trade routes, 47% of routes have a faster transit time and for Asia-Europe trade routes, 60% of routes have a faster transit time. The new alliances have dropped some ports from their services, which is one reason that the transit times overall are becoming shorter.
We also found that 37% of the trans-Atlantic trade routes and 51% of the Asia-Europe trade routes will have an average transit time difference of three or more days compared to the routes offered before April. This means that over a third of the routes offered by the OCEAN and THE alliance members will be offering much shorter or longer options for their routes.
To prepare, be sure to compare your new route options to see what best fits your supply chain, whether you are seeking to shorten cash to cash cycles or lengthen the inventory time on the water to save warehouse costs.
2) Explore and evaluate new route options with your preferred ocean carriers
Did you know that the three mega alliances will be dropping over 380 direct routes and adding over 330 new direct routes to their networks in the Asia-Europe, trans-Atlantic, and trans-Pacific trades? The new networks open up many new port-pair options among your preferred carriers. Among the OCEAN Alliance carriers, about half of the new ports for OOCL are in Europe, 44% of the new ports for CMA CGM are in Asia, and over 30% of the new ports for COSCO Shipping and Evergreen are in Europe. For the THE Alliance carriers, over half of the new ports for MOL and Hapag-Lloyd are in North America, 47% of the new ports for NYK are in Europe, and over 35% of the new ports for Yang Ming and K Line are in North America. Furthermore, THE Alliance carriers will offer the most alliance routes through Japan ports.
Most of these new routes should appear in your carriers’ schedules. However, you may be able to explore options that are not yet published in new ways. First, if you can identify a service that is operated by an alliance, then it is potentially available through all the carriers in the alliance. You may be able to contact your preferred carriers to see if routes that use different vessel operators within an alliance are available. Second, as the carriers and alliances offer new ports, their transshipment options grow as well. In addition to searching direct port pairs and published transshipment routes, consider new transshipment combinations that may be faster or more reliable.
3) Identify the vessel operator on your routes to mitigate risk
When Hanjin filed for receivership in August 2016, many shippers were not immediately sure whether their cargo was on a Hanjin vessel. The situation raised the awareness of the vessel slot sharing arrangements among the carriers. In 2017, consider diversifying your carrier selection, not only by the carriers and alliances, but also by the vessel operator for critical routes. In addition, if the vessel operator and the carrier are different for a service, consider ways to optimise your cost savings and reliability based on the carrier and vessel operators for each route.
To summarise, be sure to check new services, transit times, vessel operators, and performance to plan and optimise your supply chain. Check directly with your carriers, as well as leverage analytical tools, to help you visualise and compare carriers’ services.
We invite you to try a new tool, Route Master, to optimise your route planning. Sign up for Route Master’s beta program to start preparing for the alliance changes today.
Lionel Louie, chief commercial officer, CargoSmart Limited. He can be reached at firstname.lastname@example.org.