Shocking shipping line reliability is a direct result of the low freight rates that shippers have benefited from for years, says Drewry Shipping Consultants, so they should not be surprised that service levels have continued to fall.
The analysts suggest that declining levels of customer service by container lines shouldn’t be a surprise to anyone considering the recent financial results of the industry and knowing that rates have fallen 50% in the last 20 years.
Under those conditions, they say, something has to give, and it is service levels of all types. Or as they assert; ’you get what you pay for’.
When quizzed on their willingness to pay for better transit times, reliable day and hour schedules, uncongested terminals and cargo ready within 30 hours of docking, a majority of major shippers will indicate their willingness.
Yet an Asia/US line, which does offer these service parameters (at a premium) has been unable to expand beyond a 1,000 loads a week. So there’s obviously no ‘real’ desire by these shippers to pay for the enhanced service.
It is true that Hyundai Merchant Marine’s, Asia-Europe Express (AEX) service, launched earlier this year has had some success, but its service enhancements is restricted to a slightly faster transit and the premium significantly less.
According to June’s container transport satisfaction survey, by Drewry and the European Shippers’ Council (ESC), shippers in the UK are increasingly dissatisfied with the level of service they receive from carriers.
The report found that the service provided by container shipping lines has deteriorated since 2016 and is now seen by exporters, importers and freight forwarders as problematic.
From a maximum score of 5 (very satisfied) in the survey, the quality of customer service offered by carriers ranked just 2.8-2.9, with reliability of booking/cargo shipped-as-booked just over 2.9 and transit times also below 3.
The report on the industry’s failings came as the carriers prepared to further downsize headcount in an endeavour to squeeze costs following a disastrous start to 2018.
With customer services on the front line of any carrier staff cull, it almost guarantees shipper satisfaction will decline further.
And are shippers really to blame for the lines financial woes?
The carriers control their destiny; because they can manage capacity to manipulate pricing if they want to.
They did it in late 2009, anchoring over 600 vessels to create a $30 billion turnaround in one year.
They made a lot of money, but have never done anything like it again, reverting to form, chasing volume, filling ships to build market share.
They had a further opportunity in 2016 when Hanjin Shipping collapsed, taking a big slice of capacity with it. For four months they kept rates up, before they reverted to chasing volume and market share with price as their catalyst.
Commentators suggest that carrier management is focused on the wrong things. With the rate of return between 1995 and 2016 being 2.7%; adjusted for inflation, rates are 50% lower than 20 years ago, suggesting this is an industry that, for whatever reasons, is not profit driven.
That may be easy to explain when shipping supports other parts of a vertically integrated ‘business’, or the government chips in with subsidies.
But what of the other carriers’? Perhaps their true operating costs are so opaque, that profitability lies elsewhere.
Based on articles that first appeared in Lloyds Loading List