Port-able logistics solutions

Introduction

In an era where each process of the product supply chain is under constant evaluation, port terminals are now identified as a key stakeholder in the global supply chain process. Port selection is fast becoming a very important factor in the efficiency and speed for the market of shipped products. This article touches on the basic principles that support this new idea.

The logistics industry has changed and reinvented itself many times during my short yet progressive career in freight shipping. I remember when shipping was simply about moving cargo from A to B, with the key players in this process being a freight forwarder and the shipping line. The customer or ‘end receiver’ was exactly that; an end receiver.

The logistic supply chain

End to end supply chain management has reshaped the industry almost entirely. No longer are freight forwarders only providing a logistic service to an end receiver, they are now an extension to their customer’s business, and forwarders are now initiating innovative processes in the supply chain that are essential to the customer’s business. Supply chain management is the integration of key processes that affect a product life cycle in terms of finance and quality. These key processes are commonly identified as: vendor or supplier management, origin cargo or CFS management, carrier selection or flexibility, delivery management or speed to market. Even this is now extended as far back as vendor or supplier sourcing and as far forward to warehouse stock or inventory management, onward distribution, and e-fulfilment.

However, with customers, logistics consultants, and freight forwarders constantly looking to improve supply chain efficiency, there is one essential part of the process that has been commonly overlooked: port selection. If the key areas of the logistics supply chain are cost and speed, then the port plays an equally as important role in this process as any other factor.

Port reliability

Buyers source a vendor or manufacturer based on item price and productions quality, with a large portion of suppliers for the UK and European market being sourced in the Far East and ISC countries. A basic cost analysis shows that combined production and freight costs are lower in the ISC region than that of the Far East, but the vendor spread supplying Europe is still equal amongst the two. In recent times, the pivotal decision maker here is port reliability.

After sourcing, evaluating and analyzing a product for manufacture and shipping costs, a buyer needs confidence in knowing that this product can be shipped without difficulty, to meet their required import delivery intake or product launch date. Therefore, equal importance must be given to the reliability of the exporting port operations as is to manufacture and shipping costs. The buyer does not want to be let down at the final hurdle due to the exporting port being incapable of coping with high TEU volume, congestion, poor weather conditions or technological failures.

Delays at port of export cause cargo delays on lead times or cause important portions of the cargo to be flown airfreight – both of which carry their own penalties to the supplier. So conducting a risk analysis on port of origin is worth it in the long run.

Carrier selection

Freight rates plummeted in 2011, seeing many carriers fall in to the red. Long-term solutions see more vessel or loop sharing agreements by competing carriers, and more trade lanes served via transhipments.

With most carriers levelling out on freight rates, however, equal focus in supply chain economy is given to transportation costs. Where the logistic supply chain process traditionally revolved around carrier rates and agreements, we’ve found that other important elements in the process now decide what carrier is used for shipping, such as; transit times, arrival port location, transport links, and location of the importers warehouse or DC.

 

To read the full article download PDF

Steve Shinji, head of global supply chain solutions and development, MOL Logistics, Middlesex, UK
Edition: Edition 54

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