Ocean carrier reliability coming further in crosshairs

Even as the container shipping business tries to improve everything about itself from customer service all the way to its carbon output, one improvement that still eludes it is on-time reliability. A Danish startup founded by an industry veteran aims to help the industry raise the bar in that regard.

Copenhagen-based eeSea said in a report that less than half of the container ships serving east-west trade met their published schedules in 2019, amounting to a one-and-a-half-day delay on average. About one in 10 ships was delayed three or more days.

Simon Sundboell, founder and chief executive of eeSea, and a 10-year veteran of Maersk, said the need for reliability benchmarking stems from the lack of a clearly defined performance metric that both sides of the negotiating table can use. The company is backed by local incubator CapNova and the Danish Maritime Fund among others.

“One of my problems at Maersk is we did not have numbers for that,” he said. “There is a lot of emotion around it as the shippers will complain about it and the ocean carriers will deny it.”

As for the 2019 reliability performance, “I would say it’s bad,” he added. “I would say service has gone down.”

Other companies are looking at the impacts of vessel delays and how to measure them. Digital forwarder Flexport announced that it too was looking at shipment data and carrier schedule estimates to provide better estimates of transit time.

In reality, many companies build in delays when modeling ocean supply chains. But the number of touchpoints for a container and the increasing demands of e-commerce mean those buffers can’t stretch much further, Sundboell said.

“It’s not just the shippers, but the terminals and other logistics providers that have built in buffers across the supply chain, and that worked fine until now,” Sundboell said. “But it doesn’t work in an industry where for the past 15 years, all we’ve heard about is commoditization and margins being the worst ever.”

Shippers are the most exposed to delays due to time their inventory sits on the water. But the costs of those delays ripple through the supply chain.

Marine terminals allocate longshore labor and yard equipment based on expected arrival windows for vessels. Rail and intermodal trucking will position trailers and trucks at a port, at the expense of picking up cargo elsewhere. Sundboell says eeSea is working with a Canadian rail operator to benchmark vessel arrivals at that country’s ports.

Unless it’s a guaranteed or expedited service, most ocean freight contracts typically do not guarantee specific delivery windows, said Ocean Audit’s Steve Ferreira, whose firm helps shippers reconcile invoicing from the major container lines. He adds that major shippers, though, will leverage those delays to reduce rates on future contracts.

“You don’t get a lot of people paying attention to this and the fact that they may have been soft committed to 21 days of service and instead got 25 days,” Ferreira said. “Just as you want to know what vendors have the most invoicing errors when you go into negotiations, you want to know which carriers have the worse on-time rates.”

Sundboell says eeSeas’s reliability ranking measures operators and vessels, not when a container is actually available. The company taps AIS satellite data on container ships, geo-fences the ports to determine when a ship arrives, and compares that data to published schedule information within an eight-hour berth window.

“That is a huge mapping we have done of about 1,300 liner services globally,” Sundboell said.

eeSea’s liner reliability rankings for 2019. Source: eeSea

The most reliable carrier is Israel’s Zim Integrated Lines, with on-time reliability of 65%, eeSea said. Of course, Zim has only about one-tenth of the port calls of Maersk, which had 57% reliability.

Sundboell said the data is not weighted to vessel size or capacity, which of course can impact schedules. Such a weighting would obscure the numbers, he said. Moreover, larger operators should have more leverage with terminals to get their vessels berthed quickly.

“Bigger carriers can push through windows and push through other arrivals,” Sundboell said. 

He said further iterations of the data will look at schedule reliability from specific port-to-port pairs, as well as the reliability of operators and vessels within the major container alliances. 

“I would love to be able to say whether Maersk made the trans-shipment from Bangladesh to Singapore they promised to,” Sundboell said.