January’s Cargo Logistics Conference, which took place in Vancouver, featured a panel of logistics service providers who met to discuss the need to drive more reliable intermodal supply chains. The panel was moderated by Ruth Snowden, Executive Director of CIFFA.
Wolfgang Freese, president, Hapag Lloyd (A) Inc., mentioned the severe weather- related delays of the first quarter of 2014 and the labour challenges at West Coast ports throughout the year.
“Let’s keep in mind we are speaking of origins. We have seen a lot of weather-related issues, typhoons. The ability to stay fluid through the key logistics points is the major challenge. We cannot prepare for each and every eventuality, but we can preplan contingencies. We have to provide a timely heads- up. We have to make sure we communicate constantly with the partners,” Freese said.
What’s the role of a port in establishing realistic expectations for Canadian traders?
According to Tony Boemi, vice president, growth and development, Montreal Port Authority, ports have changed over the years.
“Most ports are very diversified. We get involved in environmental issues, we have marketing teams-we have to generate revenues that will allow us to re-invest in infrastructure. We interact with governments because they have to build the infrastructure leading up to the ports. We also educate in the context of our markets,” he said.
About 13% of the port’s traffic now is Asian trade, Boemi added.
“We take our profits and reinvest in infrastructure. This is the role of a port today. We’re involved in so many different aspects of the business,” he said.
Jean-Jacques Ruest, CN’s EVP and chief marketing officer, noted that winter seems to be more forgiving this year so far.
He noted that the focus in the early part of 2015 was certainly on labour negotiations.
As Canadian Shipper was going to press, CN had negotiated a tentative labour agreement with the Unifor union, representing 4,800 CN employees in four bargaining units at CN – clerical/intermodal; mechanical; CNTL truck owner-operators; and excavator-operators, with details of the tentative agreement being withheld pending ratification by Unifor members. CN had ealier negotiated a tentative labour agreement with the Teamsters Canada Rail Conference (TCRC) union that represents approximately 1,800 of the company’s locomotive engineers in Canada.
Canadian Pacific and the Teamsters Canada Rail Conference (TCRC) agreed to enter into binding arbitration, putting an end to the work stoppage by CP’s locomotive engineers and conductors in February.
“This decision ensures both sides will get back to the table, and gets us back to moving Canada’s economy forward,” said E. Hunter Harrison, CP’s Chief Executive Officer. “While we would have preferred a negotiated settlement, this is the right thing to do at this time.”
An arbitrator will be appointed by the federal government. On February 14, CP announced a tentative four-year agreement with its Unifor employees. Details of the tentative agreement were being withheld pending ratification by the Unifor membership.
When asked how Kuehne + Nagel establishes expectations with its clients on intermodal marine services, Brian Martin, Vice President, Sales and Marketing, Kuehne + Nagel, Canada, said that “we are customers, but we are absolutely also business partners on many fronts. The integration is incredible, and the lines are blurred between customers and vendors. As an extension of those businesses Kuehne + Nagel is not in a position where we define service levels and transit times. We are 100% dependent on our asset partners, so we are constantly in communication with them. We are always looking for what’s happening in the supply chain, and the level of phone calls and e-mails is constant. How are we managing customers’ expectations when we’re at the mercy of our suppliers? We are all trying to strive for the same thing: manage cash flows correctly, and commit to on-time performance,” Martin said.
This involves educating customers on what is realistic and what not.
“In marine transport ‘lean logistics’ concepts are counter-current, such as when the freight is on the ship and there’s 20 days at sea. Our job is to help you engineer solutions. It’s well beyond sailing,” he said.
Examining how the railways could help provide fluidity in the network and also help drive profits, Ruest said he wished that rail could help shipping lines develop a round trip costing model that would make sense.
“There’s more interest for the shipping line to bring boxes inland. It’s in our interest to create a supply chain that works for our ocean partner, so that the inland supply chain is not a burden,” he said.
Freese added that Hapag Lloyd has a few unfulfilled wishes from 2014.
“We need port infrastructure improvement. It’s not all about draft-there’s more to it. We need more space in the terminals to buffer this. We also wish that our intermodal and transport partners were not burdening themselves,” he said.
He cited the increased use of LASH vessels to store containers because there is no room on land.
“If you’re losing steaming time it makes a huge difference,” Freese said.
He noted that foreign to foreign freight, also called “triangular freight”, is paid for in Canada but never touches the country. The evolution of supply chain and lean is taking hold in foreign to foreign freight, and lean logistics is pushing the enablers of this solution.
“Carriers are capable of moving it, so the physical movement is not the issue. The challenges are typically the reliability of data to book it and meet the expectations on routing guides and delivery expectations. Compliance issues and paperwork at origin are also an issue,” Freese said, noting the variance of customs issues in foreign to foreign freight.
There can be applicable duties that change in dynamic, sometimes while the cargo is en route, and before the goods are impounded at destination.
What’s ahead for intermodal cargo, and what are some of the key messages around the future of it?
According to Martin, “the actual physical movement of freight has not changed considerably but you are challenged to respond to multiple needs with customers who have no patience. You also want unlimited elasticity in your supply chain with no restriction or friction. The reality is that there are conflicts, whether labour issues in Canada, issues on mega ships, port congestions, and conflicting events in the supply chain. I spend a lot of time trying to help you understand the practical limitations in the supply chain. The carrying cost of capital is linked to the interest rate. There is a wonderful argument to choose multiple players or providers. For example in the airfreight scenario-in some cases for some retailers it makes sense to use it for introducing product and then sea freight for replenishment,” Martin said.
Freese said that the future is positive. Worldwide, the middle class is growing and with it commodities.
“Looking at the challenges if the tendency continues with oil (prices dropping), and the trend towards bigger ships, this may initiate some sort of change measures that need to be taken,” he said.
The Port of Montreal has a ten-year plan with intent to build a brand new cruise terminal.
“It’s a pretty hard sell for seasonal business,” Boemi said. “In terms of our projects you will see increased port capacity and additional truck gates to improve the fluidity, with direct access from Highway 25. You’ll see 7000-plus TEU ships at the port. When you look at the current Port of Montreal we will probably max out by 2020, 2021. We have a project in hand, and a piece of land for a brand new container terminal,” Boemi said.
He also anticipates that the Suez Canal will be a real benefit.
“Transshipments are about 30% of our business now-as long as they keep building these bigger ships and they can’t get to the end markets, this will continue to benefit us,” Boemi said.
How will the landscape be different going forward?
“There is definitely a major need for infrastructure. We often talk about how we need to create ground capacity to handle buffer from ship/port issues. It is a constant challenge as to how we maintain fluidity. Some of it is obviously from public money. We will also need private money to come in in a big way,” Ruest said.
The use of destination trains, he said, would lead to the need for more inland capacity.
“On the Canadian West Coast over the next ten years we need to find ways to use the capacity we already have, and make better use of containers,” he added.
According to Freese, commenting on the congestion issues at US West Coast ports and any effects these have had in Canada, “we also have seen an increase of volumes into the US. Traditionally a lot of US importers have been using both West Coast and East Coast ports. I would even go as far as saying we saw some increases. There are still some huge volumes moving, but Canadian interests have been maintained,” he said.
“There has been some chaos since the October labour union strike, driving contingency planning,” Martin said.
Unfortunately the reality is that a frequent by-product of this planning is increased false bookings by consumers, he said, just to try and find capacity and buffering.
“The consumer is rightfully expecting divergency solutions. In some cases the options are limited. The reality is that the freight moves. If you look at a 2-3 year time frame, the level of service the Canadian shipper is receiving is still extremely high. The reality is the options are there-in some cases 4-6 business days to come up with contingencies, but I think the service levels are still extremely high in Canada,” Martin said.
“We benefitted from some of the cargo being diverted. When you look at how the cargo is changed in terms of reaching markets, mitigating the risk is always beneficial,” Boemi said.