The assumption is that the move by major shippers to lease their own container vessels is a short-term response to an emergency situation in global freight transport. For example, it has been reported that Walmart has directly chartered ships for its own use to sail through the third and fourth quarter of this year. It is unknown which vessels it has chartered, but it is rumoured to be moving hundreds of forty-foot containers across the Pacific every week. Other retailers such as Target, Costco and Home Depot have made similar arrangements. In Britain the department store John Lewis has chartered ships “alongside a number of other businesses”. In related sectors leading companies, such as Procter & Gamble, seem to be taking a similar approach.
Essentially what these companies are doing is bypassing freight forwarders and using their size to facilitate superior access to the marketplace at the expense of smaller shippers. If access to the market continues to be difficult for shippers, the largest of them may consider changing their relationship with physical logistics assets in order to continue such privileged access. The implication might be that the largest companies would start to operate their own fleets. This might sound extraordinary; however, it is no more than that which Amazon does with its fleet of aircraft and trucks. In the past ‘vertical integration’ was common amongst large corporations and it may be the case that there is a trend towards moving back to such corporate structures. This is a threat to freight-forwarders
Even more disturbing is that shipping lines are also increasing their attempts to cut-out freight forwarders with unconfirmed and, if true, extraordinary reports that Maersk will no longer take cargo from freight forwarders. The drivers of such change are almost certainly different and more long term than the response to the capacity crisis, however it may add to the changed market environment faced by freight forwarders.
The market for freight forwarders continues to evolve, often in unpredictable ways. At present their margins are outstandingly high. There may be a price to pay for that in the longer term.
Source: Transport Intelligence, October 21, 2021
Author: Thomas Cullen
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)