Synchronisation across maritime value chains can ease inflation

This interesting article suggests that slot management across supply chain entities could help ease the current supply chain congestion woes. It’s an attempt to define this concept that could induce more cooperation between firms and supply chain entities such as ports, terminals, and hauliers.

There’s no question that today’s world of maritime logistics and supply chains is dominated by decision-making for the benefit of each individual participant. The flow of goods overall could be improved by introducing a discipline that would make decisions for the common good look better.

The article leaves open the question of how to induce the players to participate.

We already see signs that some large shippers have already decided not to play on the same terms. Firms like Home Depot, Walmart, Amazon, and IKEA are trying out chartering their own ships and selecting their own ports, terminals, and inland transport to make their specific supply chains work better. This individual management could bring gains especially for them, and there’s a chance that if enough of it happens, some of the major bottleneck ports such as Shanghai, LA/Long Beach, and Rotterdam could see a reduction of traffic enough to lower backlogs and congestion. And the smaller ports these individual shippers might use, such as Seattle/Tacoma, Norfolk, and Savannah, will see increasing traffic and congestion. If they have the capacity that’s ok, but if not the woes will continue.

These are just examples of how not to participate.

I agree with the authors that just allowing market principles to work won’t create the gains in throughput we need to see. The markets don’t work fast enough to prevent hardship and business and personal failure.

A suggestion made earlier was for a system to ‘label’ each container (in the paperwork, and perhaps physically on it, like the priority mail labels in the US mail) with a service level standard required for this container. Those handling the container would know its priority and could adjust their individual workflows to meet the standard delivery time. Even if there were bottlenecks, the standard would help those in a position to relieve one to see which containers needed to be handled or placed first, second, and so on.

I submit that introduction of a world-wide slot system for maritime container transport needs to be accompanied by a system to reallocate the benefits and costs of the system. There need to be charges or inducements at ports and terminals to get players to fit their needs and actions in with the slot optimization system.

In fact, any system that would operate throughout whole maritime value chains needs to have the incentives designed along with the tracking or resource allocation system.

A worthwhile start would be a model of a realistic slot allocation system and its effects on, say the current congestion worldwide at ports and in hinterland supply chains. Not an easy study to conduct, but it would show where inducements need to be given, and where penalties need to be put, to prevent or reduce gaming the supply chain. Experiments with inducements could be made to gauge their effect and help choose the right ones.

By Mikael Lind et al 01/02/2022

Synchronisation across maritime value chains can ease inflation – The Loadstar