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Growing E-Commerce Demand Impacting Global Logistics Providers

The rise of e-commerce is helping to meet the demand of businesses and consumers for faster delivery times of goods and causing logistics service providers to look at their businesses differently including their use of different transportation modes. An article recently published by JLL on logistic trends points out that while mega ships (the largest ships are now 22,000 TEUs) are dominant in transoceanic delivery they are not conducive to the speed-to-market demands of today’s e-commerce groups. (JLL is a financial and professional services firm specializing in commercial real estate services and investment management.)

“The problem is that “the really big liners can only call at a few ports on a scheduled service,” said Dr. Walter Kemmsies, chief strategist at JLL’s U.S. Ports, Airports and Global Infrastructure Group. “Ships do not make money when they stand still,” he explains. “A giant liner can take four days to unload at each extra docking.”

Moreover, Dr. Kemmsies explains that while mega ships are designed to make traditional crossings such as between Shanghai and Los Angeles/Long Beach these journeys are not economically feasible if multiple stops are required en-route – as in the ‘milk run’ down the eastern U.S. coast linking New York to Savannah and Jacksonville, where there are seven ports handling more than one million containers per year compared to three on the West Coast. “A lot of storage space is needed. Unless there is enough space, the different sets of mechanical equipment which haul the containers into and out of storage areas can run into each other,” Dr. Kemmsies adds.

Smaller Ships/Intermodal Transportation Responding to the Need for Faster Delivery

E-commerce companies looking to get their goods delivered quickly to local distribution centers are using smaller 5,000 TEU ships, which are more nimble and can be unloaded much faster than the larger vessels. In addition, these smaller ships stop at more ports, enabling companies to then use intermodal transportation – a combination of rail and trucking – to complete the journey to their final destination. Dr. Kemmsies predicts we will be seeing more companies using 5,000 TEUs in peak seasons, with the smaller vessels supplementing the largest ships.

As a result of this shift, ports are adapting so that they can take advantage of the full range of ocean ships whether through restructuring the staging space for containers or expanding, according to JLL. In addition, connections between sea and land are also improving to hasten total delivery times and reduce the cost of transportation. JLL explains that “because trucks are generally more direct and, therefore, faster than a train, the contents of the international 40-foot (FEUs) containers are increasingly being repacked into 53-foot long domestic containers. Given that three FEUs are usually repacked into two domestic 53-foot containers, this reduces the cost of transportation by about a third. The domestic containers are delivered by truck to local distribution centers and some are sent by rail to distant inland locations.” Known as ‘transloading’, this process is currently used for about 50% of containers arriving in major ports – although it varies depending on the importer and the location. Dr. Kemmsies expects transloading to increase to 75% within a few years. For example, some large logistics firms in Southern California are paying rents 1.5 times the going market rate to set up location distribution centers within reach of the Los Angles/Long Beach port.

About Roanoke Trade

Roanoke Trade is a leading provider of insurance and surety solutions for transportation and logistics providers and is committed to keeping you updated on trends and developments affecting the industry. For information about our insurance products and services, please contact one of our Roanoke Trade professionals at 1-800- ROANOKE (800-762- 6653).

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