27 April 2015

[270415.EN.BIZ] Bloated Vessels And Alliances Make Shippers Rely More On 3PLs

UPSIZING ships the growth of mega shipping alliances has let shippers to rely on third party logistics providers (3PLs), according to a top executive for Agility, the Kuwaiti global forwarder.

Speaking to delegates at the TOC container supply chain conference in Singapore, Agility vice president Sundara Sundara said for small and medium size businesses the 3PL was often their first point of entry into world shipping.

"There has been a surge of small-to-medium enterprises (SMEs) using 3PLs as a one stop shop to try to keep track of all the changes that are going on in the industry," he said.

"At the same time the alliances are looking to fill up the ultra large container vessels so they are coming to 3PLs to get these volumes. So for the SME, the 3PLs become a point of entry, especially as they don't have things such as existing credit terms with the carriers," said Mr Sandara.

Kuehne + Nagel's Singapore and Malaysia sea freight chief Bjorn Schoon agreed, saying he found evidence of this trend in the increasing share of volumes that 3PLs booked with lines compared to the share booked directly with carriers by shippers.

"Forwarders control 40 per cent  global sea freight volumes - some 68 million TEU out of a total market of 170 million TEU, although the top 10 forwarders control just 15 million TEU, with the remainder controlled by thousands of smaller forwarders who concentrate on specific cargoes or trade lanes.

"Carriers control the remaining 60 per cent of volumes, but that is down from 95 per cent 30-odd years ago, and we expect to see forwarders gain further market share," he said, in a release from TOC.

One of the chief reasons for this, he said, was that in their search for reducing the cost per TEU, carriers had been reducing regional sales forces, "which means their proximity to customers has been getting less."

In contrast, he said, 3PLs had been hiring more sales people, investing in end-to-end solutions and the IT systems that support global supply chains including, crucially, the ability for shippers to run shipments over different transport modes.

He added that declining liner performance in terms of schedule reliability continued to cause stress in the container supply chain.

Global logistics manager, David Panjwani, for Africa and Asia at US-based heavy machinery manufacturer John Deere admitted that its use of its logistics service providers had increased.

The company ships 110,000 TEU per year, as well as 30,000 ro-ro units, and Mr Panjwani said that while John Deere directly books 98 per cent of its ocean freight purchasing with shipping lines the continuing poor performance of liner shipping meant a focus on day-to-day container flows had become more important.

"We have to focus more on the details, and the role of freight forwarders helping us to run ocean freight contracts has become more critical than ever.


Source : HKSG.

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