As the end of 2020 comes more closely into view, there is more attention on “logistics” than ever before. The distribution of vaccines, the most important cargo in any manifest at this time, is a paramount concern impacting all parts of society- numbering into the billions of people. Air cargo carriers and providers of integrated logistics (3 PL? 4 PL?, 5PL?- another fresh venue where numerous abbreviations abound) will play integral roles in supply chains that must be quickly assembled and then fine-tuned. In second place in importance is all the Holiday shopping which has moved online- building on a trend which has skyrocketed during 2020; warehousing, logistics, and all related distribution facets, play into it. During late Q3 and into Q4, container shipping has been in the ascendency- underlying box rates benefited from supply management and listed carriers (and also tonnage providers to the carriers) performed well. Where the carrier or tonnage owner is listed, the impacts were salutary.
Is there anything that dry and tanker folks can glean from all this, as they contemplate 2020? After all, economies and cartels will do what they do, with bulk shipping feeling the after-effects. And, noting that Senate Commerce Transportation Subcommittee hearings on vaccine distribution this week included Fedex and UPS (and not any well known maritime carriers), it’s clear that some imagination is required.
For me, a lot of the answer- and I am trying to “get to yes” has to do with presentation. In previous articles, I’ve alluded to my preference for shipowners who put their vessels out on longer term charters. There are financial benefits, and readers are familiar with notions of charterers as certainly implicit capital providers (if not actually providing actual funding as green initiatives come to the fore). But, benefits are also perceptual; with the cargo side under scrutiny for its environmental compliance, the backing of a green name is something of a badge of honor. But such backing, in the form of charterer commitments, can be positioned in supply chain terms. The term “industrial shipping”, where vessels carried breakbulk cargoes in semi-liner trades (sometimes called “neobulk”) is quaint these days. But maybe there’s room for a revival, albeit one of the perceptual variety
In testimony in front of the Senate committee, Fedex, in particular, emphasized that “…the information <about a package> is as important as the package itself…” or words to that effect. While we see a great interest in digitalization of the ship operation process (and a lot of this ties back to fuel and propulsion related data flows)- receiving a great deal of attention (even outside of shipping), there have also been efforts to tie vessels to cargo flows. However, the focus of the latter has tended towards developing competitive chartering advantages- notably in the tanker realm. It’s been my view that these types of algorithms, sprinkled with artificial intelligence, may indeed provide an edge up, but mainly in the short run. But folks from outside the business may not appreciate the finer points of differentiating temporal dimensions. After all, a two month trip and a two year contract are both called “time charters”, right?
For outsiders looking in, and I am thinking about investors wanting to distinguish among players in commoditized markets, a lot rides on perceptions. And this season, with supply chains being a hot commodity in 2020, a vessel operator’s efforts (even those that are slightly “geeky”) towards understanding its place in broader supply chains might be worth emphasizing. Such efforts might even be capital attracting differentiators.
