Increased voyage efficiency can't arrive soon enough
Congestion has been a fact of life in the shipping industry for years. Neither has it always been a dirty word. For spot trading ships, a strong market encourages charterers to take tonnage where and when they can, to the benefit of owners who sometimes get paid to wait.
For operators of more sophisticated supply chains, congestion is a killer, since it disrupts schedules constructed in large part to serve the needs of their customers whose merchandise they carry.
The congestion that followed the grounding of Ever Given and intensified in the post-COVID trade bounceback provided a very public glimpse into a world that many didn’t know existed.
The containership port congestion index published by broker Clarksons hit a new record in July with 37.8% of boxship fleet capacity tied up in port. Months of congestion and strikes have left tens of thousands of containers clogging ports from the US west coast to northern Europe.
Now congestion is becoming endemic, whether as a result of fresh COVID lockdowns, low water levels on inland arteries or the structural inefficiencies at some ports. The invasion of Ukraine and its knock-on impact to coal, grain, fertilizer, LNG, crude and oil products trades has created almost unbearable pressure on even robust economies.
Despite forecasts of a slowing in global trade dampening prospects for container and bulk volumes, congestion remains a problem for owners, operators, their customers and port authorities.
The disruption has also brought into sharper focus a bigger problem. Inefficient supply chains mean more carbon emitted; just at the point when the industry is under pressure to make reductions.
So serious is the need to reduce delays, improve efficiency and cut carbon emissions caused by congestion, that various public and private initiatives have been founded to bring together stakeholders to develop standards and work on new technology and contractual terms to encourage its wider adoption.
These initiatives, designed around the concepts of Just in Time shipping and Optimum Ship Routing are the most promising solutions proposed to date. Both rely on developing the best route for a ship based on the real time weather forecasts, vessel characteristics and port conditions in order to complete the voyage with minimal delays.
Critically, JIT can limit the amount of time that ships spend idling outside the ports by optimizing the vessel speed during voyage to ensure that it arrives and departs without unnecessary delay.
But despite this obvious benefit, multiple operational and contractual barriers mean JIT has yet to be widely adopted.
On a normal voyage, ships must adhere to agreed service speeds and times of arrival, while the port must ensure that the resources for the ship berth are available at that time. JIT requires adapting the freight contract to allow the ship to increase or reduce its speed on passage to meet a constantly updated arrival time.
Modern vessels use various techniques to estimate the time it will take to reach a destination, taking into account weather, tides and currents. Making such estimations is not without challenges.
Ship operators face problems such as the nondisclosure of information related to the vessel’s construction or its engine performance, that would improve the accuracy of their estimations and any efforts to calculate and optimize the associated fuel consumption.
Without this information, mathematical modelling or the creation of digital twins – virtual replicas of physical assets, processes, and systems – can be a challenge, thus complicating the task of providing an accurate ETA.
The barriers to JIT at ports are equally numerous. Few ports have adequate management systems to estimate the resources such as pilots, tugs, or berths that will be available beyond a 24 to 48-hour timeline. A standardization of the format for the information is required for automation and further optimization to be possible.
Much closer co-operation is required between the ship owner/operator and the charterer to overcome third party contractual obligations and provide benefits of fuel savings and emission reductions.
Implementing the JIT arrival concept requires a holistic view of the voyage, including better planning, proactive routeing, speed control and responsive port operations. But if this negates enough of the waiting time at port and its associated emissions, the result will be a win-win.
In parallel to the rise in supply chain congestion, the growth of digitalization has seen a dramatic uptick in interest and investment in solutions that improve voyage efficiency, improve the flow of goods and reduce carbon emissions.
With more of the industry moving closer towards a virtual operating model, digitalising processes such as voyage or route optimization has evolved into a necessity for competitive advantage. This newfound agility will allow companies to conduct their business and shipping operations in more efficient ways and will become the catalyst for implementing JIT shipping strategies.