Revolutionizing Global Maritime Logistics
As we like to say in New England, “If it ain’t broke, don’t fix it.” Which is great if it ain’t broken. But the COVID-19 supply chain crunch sure made it seem like something was broken. Which, in part, led to the Ocean Shipping Reform Act of 2022 (OSRA). But will that actually fix things?
The first container ship, the Ideal-X, carried a whopping 58 35-foot containers on its maiden voyage in 1956. The free-time model—the industry norm for American ports—developed extemporarily to handle the incoming waves of twenty-foot equivalent units (TEUs) that washed over the world afterward. But a lot has changed since 1956—like, Paul McCartney and John Lennon hadn’t even met yet. As the volume and pace of container shipments have skyrocketed, the free-time model has been locked in a time warp.
Overcoming Challenges and Embracing Modernization
Deadlines are tighter now; the volume of goods is ever-expanding. And the free-time model was already taking on water before COVID—had been muddling through for decades—but around 2015 importers began to push back on ever more common detention and demurrage charges. Getting containers off ships and onto trucks has increasingly gotten bogged down. More containers, under inherently shorter deadlines, have overwhelmed the free-time model. Truck drivers bale out of the industry, in part because of delays at warehouses and pile-ups at terminals. A cascade of failure has moved through the transport system.
By 2019 the Federal Maritime Commission (FMC) had heard enough and stated that,
“all international supply chain actors could benefit from transparent, consistent, and reasonable demurrage and detention practices, which would improve throughput velocity at U.S. ports.”
– FMC
Issues with the Current System: Reactive Measures and Inefficiencies
And then COVID hit. The 2020 FMC rules interpretations, eventually incorporated into OSRA, were written to get a handle on a detention and demurrage situation that had gotten a whole lot worse in the face of a global pandemic.
But OSRA is reactive to its core. It does not really alter a creaky old system, and doesn’t update or modernize the choke points; instead, it mostly put a Band-Aid on a detention and demurrage fee situation that everyone was complaining about.
Though Electronic Data Interchange (EDI) feeds have made some inroads, much of the free-time model is still conducted via email—last-millennium tech. Information is siloed. Legacy analog systems are still in use. The Internet of Things (IoT) age has not been embraced.
What we just went through with COVID will happen again when the global economy takes off (inflation and the war in Ukraine aren’t permanent) or some systemic shock happens. The free-time system has not kept up with reality. There are data points, computing power, and interconnectedness that the transport industry can tap into. As Homer Simpson once so aptly realized: “Computers can do that!?!”
Getting TEUs off a ship and onto something with wheels is a physical act. Getting all the moving parts—crews, trucks, cranes, lifts, containers, railcars, etc.—in the right place at the right time is just data management. It’s time to catch up, theoretically speaking, with facts on the ground (and the water).
Like OSRA, the free-time model is reactive. An arrival notice is sent stating a container(s) must be picked up in a matter of days. Under deadline, dispatchers have to find a truck, get it to port, and constantly check terminal websites (since are no “push” notifications or other modern conveniences incorporated into the good old free-time system). For dispatchers, there’s a lot of “hoping”—under duress—for the best.
A Holistic Approach: Optimizing Pickup Times and Container Placement
In the real world, arrival notices are notorious for being incorrect—or sent to the wrong dispatcher. Some TEUs inevitably become “lost souls” in container purgatory. With no overarching strategy for managing the retrieval of dry-cargo TEUs, there’s no reason to stack them in any order in the yard. Trucks end up waiting while containers are shuffled around to get to “that one there” on the bottom of the stack.
This is not an efficient system.
The volume of TEUs moving through ports will continue to balloon; tight deadlines won’t be going away. Is the current free-time model still the best framework for the industry? What if, conceptually, things were reversed?
Instead of dispatchers getting a notification that a box is available after the fact—putting them “on the clock” to avoid demurrage charges—what if scheduling was modernized and built on incorporating several data streams to optimize pickup times and the placement of TEUs in the yard?
Instead of being under the gun—fighting to make good on a recently imposed pickup time—trucking companies could be part of a holistic process, one orchestrated with forethought and efficiency.
This would be the next logical step in global maritime intermodal logistics, one that would be less stressful for all stakeholders.