Tall Order: Megaship at Long Beach port.

Tall Order: Megaship at Long Beach port. Photo by Tim Rue

When American Export Lines finally received a long-awaited email on March 31 from a shipping line detailing its April schedule, it came too late to do the company much good.

“I can’t really do anything with this,” Kasra Ferasat, marketing director of the Willowbrook-based freight forwarder, fumed last week. “Our customers expect us to have information a month before a shipment for proper planning, not a day before.”

This is exactly what freight-forwarding and trucking companies such as American Export Lines were wary of as three global shipping alliances made their debut April 1. The alliances include major carriers that call at the ports of Long Beach and Los Angeles, the nation’s largest shipping complex.

The alliances, which came as a reaction to shipping industry struggles in recent years, allow carriers to share space on vessels as a way to address overcapacity and cut costs.

But other links in the supply chain have been bracing for chaos with the latest rollout. Everyone from freight forwarders, cargo owners, terminal operators, truckers, and chassis companies are expected to be affected.

“Having these alliances optimizes space and costs for liners, but it does not consider the downstream effect on the supply chain, which is now in tremendous chaos,” said Nick Vyas, executive director at the Center for Global Supply Chain Management at USC.

Teaming up

In the mid-2000s, shipping lines thought the future of the industry was in larger carriers, so they built megaships such as the CMA CGM Abraham Lincoln, a 20-story-tall vessel longer than the Empire State Building is high that was the largest ship to ever call at the ports of Los Angeles and Long Beach.

But while ships grew, trade didn’t. The recession and the sheer size of megaships created a glut of cargo space that couldn’t be filled and in turn drove down prices. In response, carriers formed alliances to share space on vessels.

Vyas said this can have a domino effect.

“For example, let’s say (Mediterranean Shipping Co.) worked with Toys R Us prior to the alliances,” he said. “The liner would pick up the goods at the port of Shanghai, for example, and deliver to Port of Los Angeles at a terminal.”

The terminal operators would know exactly what cargo is on that ship and for whom it is being delivered.

“Now with the alliances, MSC isn’t just carrying its goods, it’s carrying cargo from liners in its alliance,” Vyas said. “So, not only do we have the possibility of cargo mix-up, but stakeholders (truckers, freight-forwarding companies, et al.) may not be informed in a timely manner what ship its freight is on.”

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