Executive Briefings

Global Shipping Weathers the Recession

In the area of transportation, the slumping economy has proved to be both blessing and curse, depending on which side of the deal you're on, says Mark Storen, president of Tectus Consulting.

The headlines are full of news about the impact of the recession on employment, access to credit, financial institutions and industrial manufacturing. There has been relatively little information about the fallout in global transportation. Storen says the impact has been two-edged. Purchasers of logistics services have seen a windfall of lower rates and plentiful capacity. Service providers, by contrast, have suffered dramatic drops in revenue and are stuck with far too much equipment for current demand.

Carriers of all modes have removed significant amounts of capacity from the marketplace, but it hasn't arrested the slide in rates, which hit their lowest levels in 30 years. Storen says the effect of such actions takes a while to be felt. It wasn't until the onset of the peak shipping season in the trans-Pacific trades last fall that freight rates began to creep back up. And they won't fully recover until the economy rebounds, he says.

The poor economy has had a particular impact on ocean carriers, who suddenly found it difficult to finance the building of new vessels due to the credit crunch. At the same time, they were forced to reexamine their ship-deployment strategies. They took a close look at vessel-sharing agreements with partner carriers, cutting out some sailings and rearranging others to minimize overhead.

Storen says ocean carriers have been slow to adopt technology that could help them better to manage capacity. So far, the industry has lacked the kind of web-based platform for displaying available capacity across carriers - the kind that has become routine for travelers booking flights and hotel space, or shippers looking for excess truck space. Several vendors are developing that capability now, promising a means for marketing ship space on a spot basis. Such a tool could also give shippers a system of record for purposes of ensuring accurate documentation. In the meantime, says Storen, carriers face "continued downward pressure to create more efficient processes."

To view this video in its entirety, click here.

The headlines are full of news about the impact of the recession on employment, access to credit, financial institutions and industrial manufacturing. There has been relatively little information about the fallout in global transportation. Storen says the impact has been two-edged. Purchasers of logistics services have seen a windfall of lower rates and plentiful capacity. Service providers, by contrast, have suffered dramatic drops in revenue and are stuck with far too much equipment for current demand.

Carriers of all modes have removed significant amounts of capacity from the marketplace, but it hasn't arrested the slide in rates, which hit their lowest levels in 30 years. Storen says the effect of such actions takes a while to be felt. It wasn't until the onset of the peak shipping season in the trans-Pacific trades last fall that freight rates began to creep back up. And they won't fully recover until the economy rebounds, he says.

The poor economy has had a particular impact on ocean carriers, who suddenly found it difficult to finance the building of new vessels due to the credit crunch. At the same time, they were forced to reexamine their ship-deployment strategies. They took a close look at vessel-sharing agreements with partner carriers, cutting out some sailings and rearranging others to minimize overhead.

Storen says ocean carriers have been slow to adopt technology that could help them better to manage capacity. So far, the industry has lacked the kind of web-based platform for displaying available capacity across carriers - the kind that has become routine for travelers booking flights and hotel space, or shippers looking for excess truck space. Several vendors are developing that capability now, promising a means for marketing ship space on a spot basis. Such a tool could also give shippers a system of record for purposes of ensuring accurate documentation. In the meantime, says Storen, carriers face "continued downward pressure to create more efficient processes."

To view this video in its entirety, click here.