Executive Briefings

Three Perspectives on Shipper/Carrier Relationships In the Ocean Shipping Industry

Shipper/carrier relationships seem always to be a source of friction in the ocean shipping industry. At the Retail Industry Leaders Association meeting in Orlando earlier this year, three executives with different perspectives on this issue shared their views with SupplyChainBrain. The following excerpts are from separate interviews with Ron Marotta, vice president of Yusen Logistics; Mario Giannobile, director of East Region sales for Maersk Lines; and Deborah Winkleblack, director of international logistics and compliance at Claire's Stores.

Marotta: I think shipper-carrier relationships continue to suffer from damage done during the recession, when many long-term partnerships were strained or broken. There are a number of cases where companies that had been doing business for generations parted ways over frustrations around rapidly increasing rates or limited capacity. It is a shame to see, but in some cases there was really no choice - people on both sides were fighting for their survival. But there also are cases out there where relationships were strengthened during this time - cases where service providers were able to come to the table with new ideas instead of just raising rates or putting in surcharges.

Winkleblack: As a shipper, it seems that ocean carriers have lost their concern for their customer base somewhere along the way. I am thinking in particular of the practice of "rolling." Carriers seem to think that if a customer's booked shipment can't get on the intended vessel, it is OK to send it out the next week. It doesn't seem to occur to them that this means that when this shipment arrives at the West Coast, the customer will then have to expedite it to destination or, if it's going to a retailer, maybe take a chargeback of anywhere from 5 percent to 25 percent for a late shipment. Carriers seem to be concerned with optimizing their own operations rather than serving their customers.

Over the past few years, carrier relationships have involved more angry words than people working together. And shippers play a part in this also - they haven't always taken the time to find out what the carriers need to run their business effectively and at a profit.

Giannobile: I think we actually are seeing more collaboration between shippers and carriers in today's market. Carriers are realizing that there can't be a one-size-fits-all approach. I know that at Maersk we are spending more time sitting down with customers and listening to their needs and trying to take waste out of the supply chain. Inefficiencies in the supply chain are detrimental to us and to our customers, so it is important that we engage with our customers to find out where we can improve our service to them and how we can help them improve service to their customers.

We also are putting some really strong matrices in place to improve on our numbers. And we are working with our vessel-sharing partners and our inland transportation partners and rail providers to raise the bar in terms of meeting customer expectations and delivering product on time.

Winkleblack: I think the situation with ocean carriers was much better in the 1980s and 1990s. There was a big push in the '80s for set-day scheduling. Prior to this, ships pretty much left when they were loaded, but shippers wanted to be able to know that ships would sail on a certain day. The carriers listened and instituted those programs. Then stack trains came in for the inland moves and steamship lines worked with railroads to get dedicated stack trains so customers could count on a dedicated service. And there was a lot of progress in the '80s around chassis. Steamship lines started providing a chassis with the box, which makes sense. But everything started to fall apart in the early 1990s.

It is only now that I think shippers and carriers are starting to listen to one another again. There were a lot of issues last year, but the response was mostly more finger pointing. This year I am seeing more of a willingness among carriers to sit down and talk. We are having real conversations, asking them what information can they give us and what exactly do they need from us and where can we meet in the middle. I don't know if any of that will actually get into written contracts this year, but I do believe that, for the first time, we actually are working toward that.

Current Issues Impacting Ocean Freight Transportation
http://www.supplychainbrain.com/content/videos/2011-videos/rila-2011/current-issues-impacting-ocean-freight-transportation/

Speaking Out on Ocean Carrier Relationships
http://www.supplychainbrain.com/content/videos/2011-videos/rila-2011/speaking-out-on-ocean-carrier-relationships/

The Evolution of Shipper Carrier Relationships
http://www.supplychainbrain.com/content/videos/2011-videos/rila-2011/the-evolution-of-shipper-carrier-relationships/ 

Shipper/carrier relationships seem always to be a source of friction in the ocean shipping industry. At the Retail Industry Leaders Association meeting in Orlando earlier this year, three executives with different perspectives on this issue shared their views with SupplyChainBrain. The following excerpts are from separate interviews with Ron Marotta, vice president of Yusen Logistics; Mario Giannobile, director of East Region sales for Maersk Lines; and Deborah Winkleblack, director of international logistics and compliance at Claire's Stores.

Marotta: I think shipper-carrier relationships continue to suffer from damage done during the recession, when many long-term partnerships were strained or broken. There are a number of cases where companies that had been doing business for generations parted ways over frustrations around rapidly increasing rates or limited capacity. It is a shame to see, but in some cases there was really no choice - people on both sides were fighting for their survival. But there also are cases out there where relationships were strengthened during this time - cases where service providers were able to come to the table with new ideas instead of just raising rates or putting in surcharges.

Winkleblack: As a shipper, it seems that ocean carriers have lost their concern for their customer base somewhere along the way. I am thinking in particular of the practice of "rolling." Carriers seem to think that if a customer's booked shipment can't get on the intended vessel, it is OK to send it out the next week. It doesn't seem to occur to them that this means that when this shipment arrives at the West Coast, the customer will then have to expedite it to destination or, if it's going to a retailer, maybe take a chargeback of anywhere from 5 percent to 25 percent for a late shipment. Carriers seem to be concerned with optimizing their own operations rather than serving their customers.

Over the past few years, carrier relationships have involved more angry words than people working together. And shippers play a part in this also - they haven't always taken the time to find out what the carriers need to run their business effectively and at a profit.

Giannobile: I think we actually are seeing more collaboration between shippers and carriers in today's market. Carriers are realizing that there can't be a one-size-fits-all approach. I know that at Maersk we are spending more time sitting down with customers and listening to their needs and trying to take waste out of the supply chain. Inefficiencies in the supply chain are detrimental to us and to our customers, so it is important that we engage with our customers to find out where we can improve our service to them and how we can help them improve service to their customers.

We also are putting some really strong matrices in place to improve on our numbers. And we are working with our vessel-sharing partners and our inland transportation partners and rail providers to raise the bar in terms of meeting customer expectations and delivering product on time.

Winkleblack: I think the situation with ocean carriers was much better in the 1980s and 1990s. There was a big push in the '80s for set-day scheduling. Prior to this, ships pretty much left when they were loaded, but shippers wanted to be able to know that ships would sail on a certain day. The carriers listened and instituted those programs. Then stack trains came in for the inland moves and steamship lines worked with railroads to get dedicated stack trains so customers could count on a dedicated service. And there was a lot of progress in the '80s around chassis. Steamship lines started providing a chassis with the box, which makes sense. But everything started to fall apart in the early 1990s.

It is only now that I think shippers and carriers are starting to listen to one another again. There were a lot of issues last year, but the response was mostly more finger pointing. This year I am seeing more of a willingness among carriers to sit down and talk. We are having real conversations, asking them what information can they give us and what exactly do they need from us and where can we meet in the middle. I don't know if any of that will actually get into written contracts this year, but I do believe that, for the first time, we actually are working toward that.

Current Issues Impacting Ocean Freight Transportation
http://www.supplychainbrain.com/content/videos/2011-videos/rila-2011/current-issues-impacting-ocean-freight-transportation/

Speaking Out on Ocean Carrier Relationships
http://www.supplychainbrain.com/content/videos/2011-videos/rila-2011/speaking-out-on-ocean-carrier-relationships/

The Evolution of Shipper Carrier Relationships
http://www.supplychainbrain.com/content/videos/2011-videos/rila-2011/the-evolution-of-shipper-carrier-relationships/