IS JUST-IN-TIME becoming just another thing of the past?
The issue arises because of the global debate about mega-ships.The more you follow this, the more the ramifications become
fascinating.
The discussion began in this column in a New Zealand context, but readers’ comments have moved it into the global arena. When one casts an eye at what is being said internationally, the material comes to light suggesting that concerns exist among shippers about the unforeseen effects of introducing 20,000-TEU ships.
The principal issue for shippers appears to be the potential undermining of just-in-time (or at least “on time”)
deliveries.
If one recalls, JIT has been a mantra for companies to minimise inventories.Back in the 1980s, Toyota pioneered the JIT concept with its “kanban system, borrowing the supermarket concept whereby stocks were to be supplied only when they were needed, and in the quantity needed.
At the time, and for a long time afterwards, the merits of JIT were seeing reducing costly warehousing, eliminating waste and improving productivity. On an international scale, shipping companies embraced the concept because among the points of competition between lines were transit speed and schedule integrity.
Why then are doubts arising now about the ability of supply chains to cope with 20,000-TEU ships?
A clear answer to that was given at the annual UK Ports Conference inLondon recently by Tesco’s group supply chain and logistics director, Alistair Lindsay. Representing the views of the supermarket giant,Lindsay raised concerns over the mega ships being rolled out on the major east-west trades and their impact on the ports and terminals that must handle the unprecedented peaks in cargo they create.
His principal fear was as a shipper relying on on-time delivery, thinking ahead to a point in a couple of years’
time, when vessels of 18,000-20,000 TEUs become the workhorses of the east-west trades.
“The pattern of flows of traffic into the port will change dramatically,” he said. “If we look at the evolution of[European] ports, their volumes are relatively flat or smooth, but now we have these enormous great vessels and great big spikes of
the product being dumped at the quayside and that product has to get out.”
Mr Lindsay expressed the concerns of Tesco being a multinational retailer with a cargo mix heavily slanted towards fast moving consumer goods and perishables such as food, both of which need to get to market quickly For us, our number one focus is to give the customer what they want, when they want it, whenever they want it.”
He said that if ports are unable to cope with these excessive peaks in demand and cargo is left waiting at the quayside or vessels are forced to wait at anchor for a berth at their scheduled port of call, then Tesco will not be able to satisfy this need.
His major question, therefore, was whether the port infrastructure can be developed fast enough so that it is in harmony with the evolution of the shipping lines? He followed this up by questioning whether lines are engaged
fully with ports on the logistics ramifications of vessel upsizing.
As bigger ships are introduced on the Asia-Europe trade, the carriers need fewer vessels to handle the available cargo, so loops and services are being reduced.
Ports in northern Europe are feeling the strain already of dealing with bigger exchanges per call.
The practical effect was summarised by Paul Barker, UK manager of short sea and feeder specialist Unifeeder, who said that one port in Europe had become nothing short of a nightmare.
“They’re getting big slugs of volume’that just sits there and then the terminals have to play catch up and by the time they’ve caught up another big ship arrives, so there is a wave of cargo all the time,” he said.
Mr Barker said the reduced level of services was causing havoc with customers’ supply chains and one shipper that previously had two orders per week are now left with little option but to accept one large delivery due to sailing infrequency. The shipper was facing difficulties finding the room to stock these orders.
Yet another flow-on effect of the mega-ships is that feeder vessels are being starved of terminal space. The terminals give priority at the berth to the mainline ships, which not only occupy a longer quay length, they also require more cranes to work them.
Mr Barker said that when vessels were no bigger than 14,000 TEUs, Unifeeder and its competitors would be allocated two cranes, whereas now with the 19,000 TEU ships already in service, this is no longer the case.
“We’re in this unfortunate situation as until [the terminal has] finished with the big guy we can only operate with one.”
As for the cascade effect,international shipping consultants Drewry gave an insight on the impact
being felt worldwide by reporting that on the north-south route from Europe to South Africa the average size of the vessel in operation has increased by about 80% between the first quarter in 2013 and the first quarter of this
year.
The comments coming out of the London conference are not the first time the JIT principle has been brought into question.
A few years back, in the wake of the Global Financial Crisis (GFC), slow steaming and vessel rationalisation cutbacks were introduced.
The question was asked then whether JIT production and distribution systems were being replaced by a “just
in case” (JIC) scenario by some manufacturers and shippers who could no longer rely on international shipping services to get their goods delivered by tight deadlines. They resorted to stocking-up with supplies Just in case
they fell short.
Of course, the same emphasis on saving operational costs, which drove the slow steaming and vessel rationalisation cutbacks after the credit crunch in 2008, are behind the move now to mega-ships.
Bigger ships with more fuel efficient engines, when filled with cargo, mean a lower average slot cost. Having several of these in an alliance with other carriers means operating fewer ships in total, reducing crewing costs, charter costs and bunkers.
That focus on operational costs is understandable. What importers and exporters internationally are concerned about, is that the focus is too narrow — and the consequences for their supply chains could be dramatic.