CVI’s Rachel Shames, left, and Freddie Davis of Gulfstream Shippers fielded the tough topic of ocean freight at the conference.
WILMINGTON, N.C. — Grappling with supply chain costs and constrictions dominated conversations at the AHFA Logistics Conference here earlier this month, and ocean freight took up more than its share of those.
The high cost of landing a spot on crowded container ships is likely to last well into next year, according to Gulfstream Shippers Assn. CEO Freddie Davis and CV International Director of Pricing and Procurement Rachel Shames, who discussed navigating a challenging ocean freight environment at the conference.
With the holiday season approaching followed by Chinese New Year shutdowns, they don’t expect relief until 2022’s second quarter in a best case.
Contracts aren’t counting for much in a lot of cases when it comes to getting goods on the water, and Davis said shippers should be in constant communication with carriers. Right now, though, it’s “what you’re willing to pay.”
“If you have direct contracts and (carriers) aren’t honoring them, fight, fight, fight as much as you can,” he said.
Shames noted that the Federal Maritime Commission has made it clear they won’t get involved in the rate situation. “Congress is talking about pushing carriers to take agricultural export loads,” she said, in order to fill containers to get them back to Asia quicker. She added it’s also discussing enforcement of guidelines to ease port congestion, “but on rates, no.”
The only way the situation will change soon, Davis said, is if “the American people quit buying, and if the government keeps handing out money, it will keep going.”
How do shippers keep customers loyal during these long delays? Davis said it’s important to keep the long game in mind: “If I called my pricing guy and said I was taking my (container) rate up $1,500, people would pay it, but I play the long game. Be honest; be transparent about problems. Do not take advantage of your customers in this situation.”
Better, more frequent forecasting of ocean freight needs can help shippers right now. “Bookings need to be requested a full month ahead, but your forecast should be for the full quarter,” Shames said. “Looking at what you’ll need is critical for carriers to plan, and if they can see those trends, they can make changes to help” even if capacity stays tight.
“You’ll have more success if you can be more consistent on a weekly basis of what you’ll need,” she said. For example, ordering 20 containers one week and five the next “is not good.”
Davis said shippers should not worry right now about high inventory levels. “Even if you have a lot of product right now, keep ordering it, and if you’re placing orders from the factory, you tell us,” he said.
Shames added that with inventories at record lows, it’s critical to keep ordering even if demand drops: “Inventories will still need rebuilding.”
She also anticipates more variable costing models on carriers’ part moving ahead, and that can be expensive. “It comes down to whether you can wait” on the product, Shames said. “You have to prioritize between what you need now and what you can wait for.”
It’s not worth shippers’ time to force carriers to comply with contracts: “They have more money than you can spend,” Davis said, noting that foreign ship registrations complicate any legal proceedings from the States. “Unfortunately the U.S. doesn’t own ships that ship; we own ships that shoot at you.”
He did single out Maersk — the only ocean carrier that showed up at the conference — as a line that was trying to help the situation. “Maersk told the truth when they said they try to measure their business and pay attention to allocations. We need more carriers to do that.”
