A global survey of the world’s leading importers and exporters has revealed the full extent of the impact of ‘slow steaming’ by container ships on the supply chains of businesses in the Asia Pacific region (AsiaPac).
Slow steaming takes place when container ships operate at greatly reduced speed in order to save fuel costs and improve the utilisation of their vessels. For businesses trying to ship goods internationally, slow steaming means longer journey times and delays in the arrival of goods.
Of the 290 senior executives participating in the survey, 37% were from AsiaPac, with the chemical, consumer goods, retail, healthcare and electronics industries all represented.
The survey was conducted by BDP International’s consulting arm Centrx and Saint Joseph’s University in Philadelphia, The United States.
According to the survey, 92% of AsiaPac businesses involved in international trade are being impacted by slow steaming. The most common area affected is customer service where 58% of companies are experiencing problems such as an inability to deliver goods on time or difficulties meeting their commitments.
Customer service was also the biggest concern in The Middle East and South America.
Another 51% of AsiaPac companies have seen their inventory levels affected, either because they cannot get parts in time or they are forced to hold more inventory than in the past.
Production scheduling (49%), competitiveness (30%) and cash flow (27%) are the other aspects of business operations that are detrimentally affected by slow steaming.
However, AsiaPac companies have responded to the slower travel times of container ships by doing more advanced planning (48%) increasing the number of carriers they use (38%) and increasing inventory levels (36%).
In AsiaPac, 73% of the respondents (69% globally) think ocean carriers should share the cost savings of slow steaming by reducing their rates, while 36% (31% globally) want to see these savings used to offset future increases.
“Companies affected by slow steaming are doing what they can to adjust,” says Jacques Chan, BDP’s General Manager for Hong Kong and South China. “Nearly every industry is affected by slow steaming, and the managers of import and export focused businesses want a say in how the practice affects them.”
“The shippers want carriers to understand what slow steaming is doing to their supply chains, and they want to be treated more equitably in the process. Carriers should be prepared to negotiate more favourable rates reflecting both the increased delivery times and the savings from slow steaming,” adds Chan.
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