Can transit time be guaranteed in shipping..??

My container didn’t reach the destination as per the transit time you indicated….!!!!” This is one of the common disputes/complaints that shippers have with carriers..

What is transit time and can transit time be guaranteed in shipping..??

In very simple terms, Transit time is the time it takes for the carrier to move your shipment from Point A to Point B..

guaranteed transit time - shipping and freight resource

When there is a shipment, the customer (BCO or Freight Forwarder) contacts the carrier (physically or online) to discuss and finalise the details of the shipment such as freight rates, frequency of sailings, vessel availability, space availability, container availability, transit time etc..

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Or if you are a BCO, Freight Forwarder or a freight broker, you may have a service contract, long term freight contract etc wherein the rates between port pairs is already negotiated and agreed between the parties for a fixed period of time..

Once these terms of carriage has been agreed between both parties, then the contract is in place and the bill of lading becomes an evidence of such contract of carriage..

However, if you consider these points of discussion, all of these points are variable..

Freight Rates – while the base freight may be valid for the agreed period of time, there could be incidentals such as Emergency Bunker Surcharge, Piracy Surcharge, War Risk Surcharge etc which can be added on at any time;

Frequency of sailings & Vessel availability – is provided on the basis of a liner schedule set by the carrier and/or their alliance partners, but this could vary due to several factors such as blank sailings, phasing out of ships etc;

Space availability – will be advised by the carrier at the time of shipment or booking.. You may have discussed and agreed on all above, but at the time of your booking, if the vessel is already fully booked, then you cannot proceed further with your booking;

Container availability – will be advised by the carrier at the time of shipment or booking.. You may have discussed and agreed on all above, but at the time of your booking, if there is a shortage of the container size/type you required, then you cannot proceed further with your booking..

Transit time – also falls under this “variable” category as is quoted basis the time it takes a container ship on a liner service on a particular route to travel from one port to the other..

For example, at the time of your quotation or booking, you may get the information like below from the carrier (in this example – Hapag Lloyd)..

In this example, the vessel Hamburg Express is expected to leave Hamburg on the 21st of July and reach Singapore 30 days (transit time) later on the 21st of August..

As you can see, these dates are shown under ETD (Estimated Time of Departure) and ETA (Estimated Time of Arrival)..

But this transit time is only an indication and it could vary due to several factors such as port delays, weather conditions, ship malfunction etc..

This is highlighted quite clearly by the carriers in the terms and conditions on

the booking

and bill of lading

 

Not only Hapag Lloyd, all carriers have similar clauses on their bookings or bills of lading.. It is important to remember that the shipment is governed by the terms and conditions of the bill of lading even though the bill of lading comes much later into the picture..

Some of the wordings on the bills of lading of some of the lines :

MSC

Evergreen

Maersk Line

CMA CGM

As you can see, all lines are making it clear that they don’t undertake that the goods will reach destination at any specified time..

Does transit time relate to schedule reliability..??

Transit time is how long the container takes to leave Point A and reaches Point B whereas schedule reliability is a measure of how often the carriers achieve the advertised schedule and transit time.. So yes, transit time is one of the major factors of schedule reliability alongwith having enough vessels to ensure the schedule is maintained..

CargoSmart analyzes schedule reliability and provides shippers and logistics service providers insights about ocean carriers’ performance.. Their schedule reliability review of 20 ocean carriers across 25 trade lanes done in March 2019 showed that on-time schedule reliability increased by 0.4%, from 65.7% in December 2018 to 66.1% in January 2019..

The Intra Oceania trade was the best in reliability increasing from 66% in December 2018 to 93.8% in January 2019 while the North America-Middle East trade was the worst in reliability, dropping from 61.9% in December 2018 to 39.9% in January 2019..!!

So this means that sellers using the North America-Middle East trade could only get their products to their buyers in time less than 40% of the time.. Now you can imagine how this will affect business..

So can transit time be guaranteed..??

Well, if we take the “Daily Maersk” model which was in existence between 2011 and 2015, it seems possible..

Daily Maersk was launched in September 2011 as part of an effort by the carrier to provide a differentiated product, wherein customers were given “guaranteed delivery times” on their Asia to North Europe service, for a premium freight rate..

How was this guaranteed delivery time possible..??

As per Maersk, they

  1. Increased the capacity in order to offer more frequent service;
  2. Concentrated their services between – 4 key ports in Asia and 3 key ports in Europe;
  3. Spread out port calls throughout the week;
  4. Had a daily cut off for receipt of containers rather than the previous weekly cut off, so if a customer missed a cut off today, they could have an alternative tomorrow

During its operation, Maersk Line claimed that Daily Maersk liner service attained average reliability of between 97-99% percent transporting containers from Asia to Europe..

So why was this canned..??

Lloyds Loading List, reported that Maersk Line chief executive Søren Skou told Lloyds List that “it had not been a roaring commercial success”..

Mr.Skou was mentioned as saying “Our big customers talk about the paying more for better quality services, and in our case we had a major attempt with the Daily Maersk product, achieving 95% on-time delivery of cargo — our experience was that we could deliver on our promises, but the customers were not willing to pay for it. We had a lot of extra cost to deliver that level of reliability so we have changed our strategy.

Recently, Kuehne & Nagel launched KN Pledge, the first online sea freight service solution with “guaranteed lead time in container shipping” with a 100% money back guarantee..

This offering of K+N is a bit more complex than Daily Maersk because unlike Maersk, K+N is not a carrier operating the liner service, but only offering its services as a freight forwarder and cannot control the movement of the ships..

So how then is K+N guaranteeing this, you may ask..

Well, as per K+N, they use live vessel data and data driven insights to ensure service reliability and guarantee to customers..

As the world’s number 1 freight forwarder, K+N exports about 12,849 TEUs daily and 4.7 million TEUs worldwide annual covering 63,000 port pairs over 750 weekly services using multiple carriers..

So K+N have access to tons of data based on the various shipments they have done over time and know the probability of timely deliveries vs delays.. I am sure that this data may include the schedule reliabilities of the various carriers that K+N uses and they have worked out how this will work and KN Pledge may be based on this data analysis..

But, customers using the KN Pledge platform have to agree to certain terms and conditions which govern the use of the KN Pledge and have to be explicitly accepted as an integral part of the contract between them and K+N..

But, any which way, this is a bold and unique guarantee from K+N.. We wish them and their customers all the best in achieving this guarantee and await to hear further news regarding this KN Pledge..

 

Conclusion

In spite of above successes claimed and foreseen, the business of shipping is dynamic..

The age old variables such as bad weather causing containers to fall off a ship, condition of the ship resulting in maritime disasters, port congestion etc still persist..

With the huge focus on digitalisation currently and the possible dawn of “digital shipping lines“, there is a new threat in the form of cyber attacks which may affect operations and deliveries like the ones that happened to Maersk Line and Cosco Shipping..

While Cosco recovered quite quickly from the cyber attack without much damage, it was reported that  the attack on Maersk Line affected its communications, APM Terminals and its freight forwarding wing DAMCO.. The attack also shut down the fully automated Maasvlatke II terminal in Rotterdam which could not accept vessel arrivals from June 29 to July 6, 2017 affecting schedule reliability..

So the question whether transit times can be guaranteed in shipping, may remain open still..

But, it would interesting to hear what is your experience with regards to transit times..

How reliable has the transit times for your shipments been..??

Transit times for my shipments has been

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3 thoughts on “Can transit time be guaranteed in shipping..??”

  1. Thank you Hareish. I read articles on this column on regular basis
    Regarding Transit time I have a query, whenever there is transhipment and delay happened in transport due to nonavailability of connecting vessel or any. ETA is delayed in transport then who will be responsible for the delay – Shipping line or freight forwarder or CHA or shipper or other

    • Hi Mahalaxmi, at the end of the day, the carrier is responsible to route the cargo to the desired destination either directly or via transhipment.. Once customer hands over the container to the line, till the customer gets the container at destination, it is the line’s responsibility..

  2. The best way to bring performance criteria into the Ocean contracting dynamic is to have Providers quote OTP % against the String that they are using to quote the Ocean cost between two points. BCO can then use this commitment as both a measurement and as a contractual obligation by the Provider to perform in line with their promise.If the provider fails to perform then the BCO can ‘ walk away ‘ from the MQC commitment and use alternative more reliable providers without a penalty.

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