Long adopted by Europe, short-sea shipping - defined as the shipping of cargo for moderately short distances or to nearby coastal ports - is making waves in North America as a viable alternative to ground and air transportation.
As highways and airports grow closer to bursting at the seams, short-sea vessels, which typically follow a coastline, cross a channel, or travel an inland body of water, offer a less-populated route for getting goods to the point of consumption.
Short-sea shipping may also help hurdle looming congestion and capacity issues. By 2020, domestic freight volumes will total 22.5 billion tons—almost a 10-million ton increase from 1998, according to a study done by the Freight Analysis Framework—and current railroad and highway capacity will become inadequate to handle such volume.
Short-sea shipping boasts the ability to reduce overall transportation costs and road congestion, increase national transportation capacity, lower energy consumption per ton of freight transported, and maintain a more positive environmental impact in terms of pollution and safety, say supporters.
Why, then, hasn't this seemingly no-brainer idea gained more traction?
Inbound Logistics recently discussed the obstacles and payoffs of short-sea shipping with Chuck Raymond, CEO of Charlotte, N.C.-based ocean carrier Horizon Lines. Raymond, also a board member of non-profit industry group The Transportation Institute, has been an outspoken short-sea shipping advocate since 2003.
CR: Over the next decade, our nation faces a near doubling of container imports to more than 30 million TEUs. It is impractical to consider building our way out of the looming inland infrastructure crisis, a move that would require thousands of costly miles of both highway and rail track construction.
Instead, using existing waterways, short-sea shipping will improve the flow of trade and help alleviate congested intermodal gateways. The nation also gains an environmental benefit from taking trucks off congested highways, and using ocean transportation, which continues to be one of the most cost-effective and environmentally friendly transport modes.
CR: We have some legislative hurdles to cross to make deployment of a short-sea service for containers commercially viable. As currently constructed, the Harbor Maintenance Tax (HMT) - a federal tax imposed on shippers based on the value of goods being shipped through ports - serves as a clear disincentive for a coastwise service because it means cargo arriving in the United States incurs a double taxation hit.
HMT creates a competitive disadvantage for Jones Act operations as compared to truck and rail cargo movements. I believe Congress understands this issue and will work on repealing HMT this year.
CR: We need to create an amendment to the HMT exempting intercoastal shipments. With immediate changes to the HMT this year, we could begin to test the East Coast/Gulf Coast short-sea shipping market as early as next year.
The Title XI loan guarantee program is critical to the development of a short-sea shipping solution for the United States and all Jones Act trades. We need to make the program user-friendly to promote the growth and modernization of the U.S. merchant marine and U.S. shipyards.
CR: The nation as a whole will be the big winner. Congested ports and intermodal gateways add cost: any logistics professional can provide examples of what even a half-day delay means to margins and the bottom line when moving raw materials to finished products.
And, these impacts trickle down to both investors and consumers.
The nation also gains from short-sea shipping's added safety, security, and environmental impacts, as well as avoiding the tax implication Americans would face in absorbing the levels of new highway construction necessary to handle the projected volumes.
CR: Each program has its own set of challenges. The inland short-sea shipping model works well for bulk and barge operations.
Shipping ocean containers via inland waterways, however, does present some challenges with cranes and other infrastructure required at interior points to help facilitate efficient transfers.
The coastal model claims the benefit of existing infrastructure and port conditions; allowing for deep-water ports to shuttle containers to a large number of more shallow-water ports using existing assets.
IT Vendors Face New Challenges
Companies' desire to better manage supply chain events and make informed logistics and transportation decisions based on reliable data has led to an increase in the global supply chain management (SCM) software and services markets.
New analysis from consulting firm Frost & Sullivan reveals that revenues in this market totaled $6.5 billion in 2006, and are estimated to reach $11.64 billion by 2013.
"The growing need to provide suppliers and management with early warnings based on data obtained from internal enterprise resource planning and other supply chain management systems acts as a major driver for the uptake of supply chain solutions," notes Dushyant Mehra, Frost & Sullivan research analyst and author of the report, World Supply Chain Management Software and Services Markets.
Event management and performance management applications are emerging as competitive tools because they help companies manage highly complex supply chains by reducing lead time and cost, explains Mehra. As a result, applications that help coordinate supply chain activities will likely play a key role in the near future.
These applications help companies detect, diagnose, and resolve performance glitches before they become expensive problems.
This increasing need for integrated solutions, however, represents a key challenge for supply chain vendors. Due to rising supply chain complexities, the supply chain planning, execution, and coordination components need to function together to achieve supply chain optimization, the report shows.
Supply chain vendors will be required to pay greater attention to product customization and supply chain visibility, says Mehra.
Because transparency of goods in the supply chain represents a critical factor in maintaining optimal inventory levels, supply chain visibility continues to gain significance.
Likewise, customization is slowly gaining pace due to increasing demand from cost-conscious customers.
U.S. Ports Rev Up The Economy
If you've been to a U.S. port recently, you undoubtedly witnessed a place of high activity.
Thanks to the boom in imports from overseas manufacturing and sourcing, U.S. ports are posting tremendous growth, and having a lasting impact on the national economy.
Last year, U.S. deep-draft seaports and seaport-related businesses generated approximately 8.4 million American jobs and added nearly $2 trillion to the economy (see chart, right), finds a new study conducted for The American Association of Port Authorities (AAPA) by Martin Associates, a Lancaster, Pa.-based business consulting service.
"The tremendous growth in overseas trade volumes moving through our ports in the past decade has been a huge boon to the American economy," says Kurt Nagle, president and chief executive officer for the AAPA. "The jobs these imports and exports create are spread throughout the country, not just in port cities, making them a vital part of our nation's economic fabric."
The study combined 2006 U.S. port cargo statistics with thousands of port-sector interviews to examine aspects of port life ranging from jobs and wages to business and tax revenues.
Here are some interesting findings:
- Of the more than 8.3 million Americans working for ports and port-related industries in 2006, nearly 7 million were employed by firms involved in handling imports/exports, such as retailers, wholesalers, manufacturers, distributors, and logistics companies.
- Businesses providing goods and services to U.S. seaports directly and indirectly paid $314.5 billion in total wages and salaries. Of this total, $207.4 billion came directly from businesses involved in handling international waterborne commerce. And, port-sector businesses generated a high rate of economic output—business revenues and the value of the goods and services they provided totaled nearly $2 trillion in 2006.
- In 2006, 507,448 Americans held jobs such as terminal operators, longshoremen, freight forwarders, steamship agents, ship pilots, tug and towboat operators, chandlers, and warehousemen, as well as jobs in the dredging, marine construction, ship repair, trucking, and railroad industries. These direct port-sector jobs supported another 630,913 induced jobs due to purchases of food, housing, transportation, apparel, medical, and entertainment services.
- Port-sector workers earn, on average, about $50,000 a year—$13,000 more per year than the National Average Wage Index, as computed by the Social Security Administration.
Logistics Help Wanted
Experienced logistics professionals looking for jobs are in luck - they are very much in demand these days, reports Don Riemenschneider, senior recruiter for executive search firm Lucas Group, Supply Chain & Logistics.
Because supply chain and logistics has become a more highly recognized and implemented function in recent years, these positions are experiencing record growth across nearly every industry, finds Lucas Group.
"Companies are beginning to realize the importance and necessity of establishing some version of supply chain organization," says Riemenschneider. "Logistics positions, such as warehousing, distribution, and transportation no longer suffice alone.
"The interlink between all facets of the supply chain are just as important, from the product development and procurement functions through the delivery of the product to the end user. As a result, certain positions are experiencing faster growth."
As with nearly all things supply chain today, globalization plays a key role. Individuals with global sourcing experience - particularly those familiar with foreign factories and capabilities, and those who can create working relationships between domestic purchasers and foreign producers - are most desirable.
Specialized managers, especially those familiar with import/export, international logistics, customs brokerage, and supply chain integration, are also seeing job growth, says Riemenschneider.
The need for diversity in logistics positions means roles are changing - women and minorities are becoming a larger part of the supply chain and logistics workforce.
"The supply chain world is changing dramatically. Companies should embrace these changes, or they will find themselves at a competitive disadvantage," notes Riemenschneider.
Small Companies, Big Concerns
What are small distribution and wholesaling companies worried about today? Taxes, the general state of the economy, and energy/fuel costs were their three leading concerns during the second quarter of 2007, according to the latest Small Business Research Board (SBRB) study.
Not surprisingly, foreign competition also ranked high on the list for the owners of distribution and wholesaling businesses who responded to the nationwide SBRB poll, which was co-sponsored by small and medium-size business consultancy International Profit Associates (IPA).
The quarterly poll also measures small distributor and wholesaler interest in expanding operations over the next 12 to 24 months.
Only 31 percent of respondents intend to expand during this period; of those, 21 percent plan to provide additional services, 20 percent would expand current locations, and 19 percent wish to add locations.
The business owners cite improving staff training as the key to productivity improvements over the next 12 to 24 months. Improving automation, adding staff, and increasing automation or technology rank second through fourth.
"Distribution and wholesaling companies are always striving to increase productivity. They will be placing emphasis on improving staff training and upgrading their business systems in order to meet their optimistic revenue expectations and still maintain or grow their profitability," says Gregg M. Steinberg, president of IPA.