January 10, 2024

Container Logistics 2024

The recent historical drought affecting the Panama Canal and the escalating tensions in the Red Sea, leading to a decline in Suez Canal usage, have significantly impacted global trade routes. Meanwhile, rates for ocean transport are increasing, according to the Drewry World Container Index and Freightos. Maersk also announced the complete rerouting of all ships headed for the Suez around the horn of Africa with no exceptions.

But what does it really mean for the industry and its future?

These events underscore the urgency to rethink container logistics, particularly focusing on the often-overlooked aspect of empty container management. With the global supply chain at a pivotal juncture, it’s time to address the inefficiencies in the empty container supply chain and why empty container management is about much more than planning a single trip from A to B. 

What’s the Empty Container Supply Chain?

In the complex network of global logistics, the movement of empty containers represents a substantial challenge and cost. Annually, the logistics industry spends over $20 billion on moving empty containers, say  xChange, a process known as container repositioning. 

The empty container supply chain literally refers to the process of sending empty containers back to the globe's manufacturing centers. But this an incredibly complex part of the supply Chain, despite the perceived lower value of moving an empty container.

This issue arises due to imbalances in trade; for instance, European and American ports often have a surplus of empty containers, while Asian ports face a deficit. This imbalance leads to congestion, handling delays, and increased costs at ports. Further, the fuel-efficient vessels of today mean that fuel costs for transport across major ocean lines are almost identical-whether empty or full. And the deficit literally means that the imbalance always exists. So is that the onus of the problem, or are other problems and challenges affecting this reverse flow?

Top Myths of Empty Container Logistics

The surface of empty container supply chains seems simple: always send an export for every import, but that isn't practical. Additionally, even if such a shipper were to exist, it'll never line up perfectly across all shipments. As explained by Marine Insight, “Contrary to common belief, the journey of a container across multiple consignments is not a linear or straightforward one. For a carrier, even though its vessels might move in a fixed rotation on the scheduled service, its container allocation and movement depend on factors such as the availability and nature of the commodity, the pickup location, the exporters and importers involved, and the destination.” There are a also a few other myths affecting this global dance, including:

• Myth - Empty Container Repositioning Is a Minor Concern
• Reality - It’s a major financial burden, costing the industry billions annually.
• Myth - There’s Always Cargo for Return Journeys
• Reality - Trade imbalances often mean containers return empty, incurring additional costs.
• Myth - Technology Can Fully Solve the Issue
• Reality - While technology aids in planning, it cannot completely offset the structural challenges of trade imbalances. But, more visibility into all containers across all modes can help shippers identify patterns and opportunities for optimization.
• Myth - Empty Containers Don’t Affect Consumer Prices
• Reality - The costs of repositioning empty containers contribute to higher shipping rates, impacting consumer prices, as well as higher fuel costs for each shipment too.
• Myth - The Problem is Uniform Across All Regions
• Reality - The issue varies significantly depending on regional trade imbalances and economic activities.
• Myth - New containers eliminate the issue.
• Reality - New containers aren't feasible for supply chains that are already struggling; plus, long lead times in container manufacturing continue to exist.

Tips to Improve Empty Container Logistics

It's obvious that the problem of empty container logistics requires a more advanced strategy. However, shippers can kick-start the process of reducing costs and stress by applying these tips.

• Optimize Container Utilization - Employ strategies like freight pooling and rail to reduce empty trips.
• Leverage Technology - Use digital solutions for better forecasting and container movement planning.
• Encourage Use of Shipper Owned Containers (SOCs) - This shifts the responsibility of container repositioning to the shipper.
• Implement Efficient Repositioning Strategies. For example, try to pick up an empty container anytime you drop-off a full container.
• Promote Back-Haul Cargo - Encourage shipping low-value commodities in empty containers on return journeys.
• Enhance Supply Chain Visibility - Anticipate and manage container movements more effectively with better visibility into the drop-off/ pick-up processes.

Insight From Crane Worldwide Logistics’ Experts on the Red Sea situation

The current scenario in the Red Sea is no doubt escalating as we continue to see carriers divert shipments via the Cape of Good Hope, adding significant transit times for shipper’s freight arriving at ports in Europe. This is not a short-term disruption for the ocean freight market. It is important to remember lessons learnt. The container shortage remains fresh in our memories from the COVID pandemic. The outbound leg from Asia to Europe is just the beginning of what could be more turbulent times ahead in 2024.

Containers shortly arriving in Europe through the diverted routing will need to make their way back to the manufacturing hotspots in Asia.

With the current unavailability of the Suez Canal routing, one can only assume that carriers will also be diverting their vessels back to Asia via the Cape of Good Hope.

With additional transit days for the return schedules and the upcoming Lunar New Year holidays commencing on February 10, 2024 in Asia, this is likely to further exacerbate the supply chain disruption we are currently experiencing.

 Air freight costs are rising. With rail freight from China to Europe heavily impacted by the conflict in Ukraine, it is important to partner with your logistics service provider for your long-term planning in 2024, alternative solutions are available.

Regular updates on the Red Sea situation are available here, please don't hesitate to reach out to your local Crane Worldwide Logistics representative to discuss your options.

Streamline Your Freight Container Supply Chain with Crane Worldwide Logistics

There will always be challenges in managing the flow of full versus empty containers between areas. However, shippers that take the time to think strategically will be better-suited to handle not only current but future disruptions. Further, they'll be more apt to work with experts in all forms of transport, i.e., Crane Worldwide Logistics, to find optimization opportunities across other modes and plan accordingly.

Explore how the right partnerships can improve your supply chain with Crane Worldwide Logistics by getting a quote now.