It’s all about the container. In a sense the ship, the truck and even trains are just interchangeable pieces of the delivery system – it’s really all about getting the container from factory to warehouse and back again for reloading. A simple concept for an inherently complex business.
Greg Tuthill, the chief commercial officer at SeaCube, a New Jersey-based container leasing company, knows his way around the container. Tuthill, besides working on the container leasing side of the business – essentially a supplier of containers, has worked for a number of ocean carriers during his career, giving him a nuanced view of the challenges facing both carriers and shippers traversing the unpredictable waters of the off-again, on-again disrupted supply chain.
In an interview with AJOT, Tuthill was asked with so many unpredictable elements like COVID-19 instigated lockdowns and reopenings in China and now the Ukraine War and trade bans, how can a shipper or carrier keep their containers working, circulating in their networks? Tuthill’s take on the problem is to try and get ahead of the situation before it is a problem, “One, I think people forget that they need to be proactive and not reactive. Getting ahead of it, whether it’s seasonality, or trying to have contingency, or making sure that they have looked a couple months ahead…” He added that he’s telling his customers that they will need equipment in the 3rd and 4th quarters this year not to wait, “I wouldn’t wait that long for a couple reasons. One is I think the supply chain will get even more disrupted. Number two, the constraint the supply shocks across the globe will create – (producing) delays further upstream from the raw material suppliers, not being able to get materials delivered.”
The production delays (largely in China where most ocean containers are made) are more likely to occur in the manufacture of “reefer” (refrigerated containers). As Tuthill explains the manufacturing delays might not be “on the container production side, but on the refrigerated machinery side. If you think about the refrigeration side of the business you need a machine to go into a container, but the machines have copper, aluminum, they require nickel for producing some of those products. They have semiconductors that go into the controllers. All of this is what I consider upstream supply challenges that will maybe create capacity issues.”
The challenges for the carriers is keeping their containers moving, a problem manifested by bans like in Russia and Belarus and the ongoing disruptions in China. Maersk has already dispatched a vessel to help retrieve stranded empty containers in Russia. But addressing the challenge of keeping the “assets” moving within network isn’t just about “reacting” to a specific event but rather planning well in advance to mitigate the damage. Tuthill suggests that “liner operators should start thinking about maybe pulling some of the demand forecast forward, just like the retailers have in the last year and a half, because the cycle times for getting either containers positioned or for making sure that they’re ready for head haul demand and (adequately covered) seasonal demands.”
And seasonal demand is often built around fruits and produce temperature-controlled logistics, essentially reefer containers. When AJOT asked Tuthill about how strong the reefer sector has been during this disruptive period, he replied, “Obviously, the refrigerated markets are so much more resilient and consistent and reliable compared to any other market, just because of the whole premise that food is a necessity and not a luxury. It shifts the category – shifts it a little bit – so, during the reopening, you start to see different products move to different destinations, and outsourcing shifts go on because of that. I think the other big thing that’s changed is there’s more food service delivery taking place, which is also changing how things are either purchased, moved or planned for, from a supply chain standpoint.”