Carrier bankruptcy and visibility—if you have one, you need the other

Posted on: September 14th, 2016 by The IAS Team No Comments

South Korea-based Hanjin Shipping filed for bankruptcy two weeks ago, which has caused a well-publicized upheaval in shipping. Financial issues at the world’s 7th-largest container shipping line have caught the world’s attention—proving yet again how little the general population appreciates containerization and its impact of daily life. Immediate fallout has been disruption of supply chains by the simple fact that two thirds of Hanjin’s 98 vessels have been refused entry at ports worldwide, many others arrested by creditors, and dozens more are slow-steaming or even drifting on the high seas until it is “safe” to berth. This has put 540,000+ TEUs worth of cargo, valued at $14B, in limbo. The rosiest estimates for the delivery of this cago indicate it will be another 2-3 months before order is restored—essentially too late for the important holiday season. The cost to cargo owners may exceed the value of the cargo itself. Many thousands of shippers—retailers and manufacturers–are in the lurch. Retailers may have inventory deficits for their holiday season (meaning part-time seasonal job cuts as well); manufacturers may face crippling production line stoppages. Both may require JIT (and very expensive) airfreight for the most critical cargoes.

But some good news appeared over the weekend as Hanjin’s parent, Korean Air Lines, pledged support of $54M to help pay for port handling charges, so some ships can now unload. But progress will be slow and there is still much confusion as to what is going on. The ripple effects are many: marine terminal congestion as block-stowed Hanjin loads need to be brought into the stream, the lack of returned empties (especially the chassis under them) affecting equipment pools and truckers’ trips, and other friction in an already fragile land-side process.

Importers whose loads have somehow made it into the domestic supply chain are breathing easier, but exporters still face “logistical nightmares” as they try to rebook outbound shipments on other lines (most of whom have raised their rates). Inland distribution centers and rail ramps remained weighed down by stacks of empty Hanjin boxes that no one wants to handle.

This episode has reinforced the need and criticality of first- and last-mile supply chain visibility. If your container is on a ship, you likely know it is there, and that vessel is bristling with GPS sensors and data, albeit nothing actionable per se from a shipper or consignee perspective. However, for owners and managers of cargoes en-route to the port or from the port to the ultimate destination can benefit from visibility and the tools to manage these moves in times of crisis, be it financial or otherwise. REZ-1 offers several solutions that help, among them Dispatch Manager to control land-side transportation and its providers; and Domestic Reload to help turn “stranded empties” into back-haul revenue opportunities.

You have to know where your boxes are, and have the tools to do something with them, to mitigate the operational risks of container transportation.

By Blair Peterson

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