The ocean shipping industry is awash in a sea of confusion. Some liners are putting vessels on furlough to squeeze capacity and offset operating expenses. Others are shifting assets to demand, leaving equipment shortages in underperforming lanes. Shippers beset with their own swelling costs continue to demand make-or-break pricing, while some carriers risk running aground as freight rates bottom out. Meanwhile, the worldwide ocean-going fleet continues to grow.
The uncertainty of a global economic crisis and recovery has been cast in a back and forth drama on the high seas. Carriers are idling capacity, ditching older vessels, downsizing ships, and pitching new services and rates, while jockeying for position in otherwise tight trades.
Swedish-based Wallenius Line, one of the world's foremost ro/ro carriers, recently and purposefully streamlined its active fleet by 20 percent to offset desiccating demand for new automobiles.
The automotive market has been severely impacted by the current global malaise and volumes have decreased as much as 40 percent compared to the same period last year.
"Like our customers, we have to adjust capacity," says Arild Iversen, CEO of Wallenius Wilhelmsen Logistics, the liner's logistics arm. "Because we do not predict any significant up-turn in the market until 2010, we will start to put vessels in cold lay up. We are keeping a close eye on market developments and will adjust capacity in response to this.
"With our current planning, we expect to have 15 to 20 percent of our capacity in lay up during the year," he adds.
Withdrawing inefficient ships encourages higher utilization of the remaining fleet and substantially reduces operating costs of laid-up vessels. And Wallenius isn't alone.
Japan's two largest carriers recently reduced container capacity by an additional 10 percent on major routes. MOL, the country's second-largest shipping company, says it will scale back ships in three of its four major shipping lanes, including the Trans-Pacific. NYK Line is also cutting capacity on primary routes, such as Asia-North America, by idling older vessels and using smaller ships.
As capacity in certain lanes falls, carriers are increasing rates. For example, in the Asia-Europe trade where MOL has already reduced capacity by 30 percent, the carrier is raising rates by as much as 30 percent to improve profitability.
Elsewhere, Maersk Line recently began restoring and raising rates in certain trade lanes—North America to Middle East and Indian Subcontinent trade, North America to Mediterranean and North African trade, among others—in an effort to mediate operating expenses.
Fluctuations in capacity and rates have both shippers and carriers wary about the stability of the ocean freight industry. Some shippers are negotiating ocean carrier contracts based on spot-market prices, which many carriers see as a bad precedent for steadying rate variability.
Amid all this uncertainty comes one glimmer of encouragement: the number of vessels laid up has begun to level off, suggesting some stabilization between supply and demand. As of the beginning of April, 485 ships of 1.42 million TEUs capacity were idled, accounting for 11.3 percent of the global fleet, according to AXS-Alphalinera, an ocean-shipping consultant based in Paris. This compares with 484 vessels of 1.41 million TEUs two weeks earlier when the lay-up rate showed the first signs of decelerating after surging from 70 ships of 150,000 TEUs in late October 2008.
Despite efforts at rationalizing capacity, the world fleet continues to grow, with 79 new ships and 297,000 TEUs of capacity coming on line so far in 2009, reports AXS-Alphalinera. The fleet's year-to-date capacity has grown by a net 1.9 percent.
Wincor Nixdorf Opens DC Nexus in Singapore
Wincor Nixdorf is singing the praises of its new Global Distribution Center (GDC) in Singapore, which serves as a strategic storage and dispatch location for spare parts replenishment in the Asia Pacific theater. The German company provides retail and retail banking hardware, software, and services such as ATMs and point-of-sale (POS) systems.
Growing consumerism in markets such as China has built demand for responsive replenishment services, opening up new growth opportunities for peripheral Asian locations with developed transportation and logistics infrastructure.
The Singapore GDC complements an existing center in Düren, Germany, and enables Wincor Nixdorf to control stock efficiency and quickly respond to customers' supply needs across Asia.
"Wincor Nixdorf is committed to providing a high availability of spare parts to customers," says Ken Ng, manager of the Global Distribution Center in Singapore. "This includes some service parts that we manufacture in Singapore and China. By sourcing locally, we can deploy goods faster."
Wincor Nixdorf delivers repair services and manages stocks of 20,000 different types of spare parts across the globe at its regional distribution centers, field service locations, pick-up and drop-off points, and technicians' vehicles. It dispatches 4,500 consignments a day to retailers and banks with delivery times of 24 hours to Europe, and 48 to 72 hours in Asia.
Volkswagen De-bugs RFID
The Volkswagen Group has turned to IBM for help rolling out radio-frequency identification (RFID) in its supply chain to improve material logistics operations—a move that might finally spark widespread adoption of the technology.
Europe's largest automotive manufacturer is deploying the new system after a pilot project that tested RFID use between its suppliers and manufacturing plants. Utilizing IBM Global Technology Services' RFID container management solution together with its WebSphere Premises Server, an application-neutral RFID middleware product, the new system enhances Volkswagen's receiving operations.
Information on the tagged containers is automatically collected by readers at all key locations throughout the supply chain—at the supplier's shipping department, through the inbound movement to manufacturing facilities, then during storage, collection, and installation on the automaker's assembly line. By using the same process for returning empty containers to suppliers, Volkswagen reduces the volume of paper documentation and bar-code labels it needs to print.
"Our long-term goal is to implement an integrated, paperless production and logistics chain throughout the whole group," says Klaus Hardy Mühleck, Group CIO and head of Group IT at Volkswagen. "The pilot project showed that we can reliably integrate RFID technology into our business processes at a low cost."
For the pilot, Volkswagen fitted 3,000 shipping containers carrying sunroofs for the new Volkswagen Golf with passive RFID tags supplied by Intermec Technologies Corporation. The technology has been refined so that it can automatically register metal containers, which historically have interfered with RFID performance. Readers at the entrances to the manufacturing line, along with mobile handheld scanners and forklifts, identify the containers and their contents.
Moving forward, Volkswagen is looking to introduce RFID tags to all shipping containers carrying auto parts destined for its German manufacturing facilities.