Over the past few months, we here at Strix have noticed through our daily operations, the increasing truck scarcity as it relates to providing last-mile transportation for international shipments. This trucking crisis is unsettling to all involved, from the importer, intermediary service providers, and particularly ocean carriers.
Ocean carriers are being exposed to this trucking shortage like never before. Once seemingly impervious to market fluctuations of this kind, ocean carriers sought to include last-mile services. But as carriers look to gain greater control over their equipment, by offering store-door contracts to their clients, they have stumbled into the wildly competitive 'trucker’s market'.
As the 2018 Trans-Pacific Ocean Carrier contract renewal season rolls around, there is an air of tension among major ocean carriers. Why?
The once thought to be ideal store-door contract situation is waning in terms of profitability for ocean carriers and may soon be a thing of the past. The present trucker’s market has left ocean carriers exposed to shortages producing an inability to fulfill store-door contracts, rendering them loss-making moves at times.
This is the outcome of truckers who are no longer able or willing to honor previously negotiated dray rates, leaving carriers scrambling to schedule door delivery and paying spot rates to fulfill their own service contracts. In general terms, the ocean carriers are left with the leftovers, in turn executing poorly on their contracted service.
In the near-term, this means that those importers who are enjoying a sweet ocean carrier contract may be feeling some serious pain points in the weeks and months to come until further negotiations are made. To mitigate damaging client relations further, exposure to skyrocketing and generally volatile drayage costs, some major ocean carriers have voiced that they will seek to make changes to contracts.
A recent JOC.com article, Container lines resist US door delivery exposure (February 12, 2018), hints that the clear majority of carriers will look to avoid the use of store-door contracts for 2018. Those that are negotiated as store-door will likely have clearly defined terms which limit the risk of increasing drayage rates.
What we know is that this is not the marketplace of days gone by. Importers with deeply rooted relationships, aka contracts, with their ocean carrier, are currently experiencing major hurdles in receiving containers and their expectations are not being managed well.
The advantage of the store-door contract is being diminished for both importer and carrier. Clearly defined expectations about transit time and costs are no longer being met.
In an industry that relies on compliance and status quo thinking, we challenge you to think a different way as you reconsider your 2018 Transpacific contracts. Where others perceive a supply chain nightmare, we see an opportunity to have more flexibility over choice in the quality of service, pricing, and better relationships.
Want to learn more about taking control of your last-mile delivery? Connect with us today!
Or give us a call at 406-922-6600. Our domestic and international freight team is here to serve you.