The little guy
Feederships should be given the same priority as motherships if the cargo chain is to continue uninterrupted
Ports that give as much care and attention to feeders as they do to motherships stand to gain, as Dave MacIntyre explains
Terminal operators stand to gain more volume from mainline operators if they turn their attention towards easing the transhipment container flow between those operators and regional feeders.
If they achieve this, more volumes will be transhipped rather than carried direct and, moreover, those transhipped volumes will happen at their terminal and not at their competitors.
That is the view from one major feeder operator, who says there are commercial benefits to be gleaned from major hub ports focusing on the “holistic” picture of the total supply chain of containers through to the outport.
Tristan Howitt is managing director Asia for X-Press Feeders, the consolidated brand of privately-owned Sea Consortium in Asia and X-Press Container Line in Europe/the Caribbean, which is the world’s largest common carrier feeder with liftings of 2.5m teu in 2010.
With 56 ships chartered, two owned and eight 2,000-teu ships on order, X-Press Feeders has a global view of the transhipment business and has a broad perspective on what makes transhipment hub terminals and feeder networks work, and what causes them to fail.
“The aim of any transhipment hub partnership with its feeders is to ensure that it can provide the cheapest cost of delivery to the outport, on the most comprehensive and reliable network.
“The point that is sometimes missed is that for the main line operators, the transhipment call and even the transhipment price is not the only important thing. It is the timely and economical delivery to the final outport that really matters to them,” he says.
“However there is sometimes a tendency for ports to focus on satisfying the need only of the major vessel calls. If there is a conflict between calls from main line operators and feeders, there has been a tendency in some ports to cancel the feeder vessels and accept the major ships.”
Mr Howitt concedes that there can be some understandable (but nonetheless illogical) rationale in those ports where the box operator is directly invoiced, instead of the ship operator.
A feeder operator may have boxes belonging to 50 or 60 customers on a ship: “None of the boxes belong to X-Press. All belong to our customers.”
Therefore, the feeder can sometimes barely feature as a customer to the port’s commercial department. As a result, mother vessels get priority, feeders can be left until last and the transhipment chain thus fails to work efficiently.
Operationally, giving the mother ship absolute precedence can also mean that the terminal fills up with boxes awaiting transfer on to the feeder. While this is usually manageable, there can be occasions when the excess becomes a glut and the terminal jams up.
“This happened in many ports before the global financial crisis in the first and second quarter of 2008, when there was a sudden demand for larger feeders to clear the backlog while mother vessels had to be delayed or bypassed. Many terminals predicted it rather well and had come to the conclusion to give feeders and mother the same priority. Others did not,” says Mr Howitt.
The main area of commercial gain for a regional transhipment hub, he says, is to encourage comprehensive and efficient feeder networks so that the relay move works seamlessly. This in turn will encourage larger volumes through the hub as main line operators conclude that the system works, and that they can thus deliver their cargo to the end port very cost effectively compared with other options.
“Having the largest and thus cheapest slot-cost feeders based in a transhipment hub, means that the hub can compete with the advantage of unit cost on the entire delivery to the outport, and not simply have to fight their transhipment hub competitors on terminal handling charge price, which is usually a race to the bottom of the tariff.
“There is no greater barrier to entry for an emerging feeder hub than being too physically near to another regional competitor which already has a first-class feeder network.
“If main line operators know they can get their containers transhipped efficiently on to comprehensive services at a regional hub, then they will be naturally attracted.
“Some ports have a highly-developed approach to this feeder/mother conundrum and what makes the whole show tick, and whilst all terminals have their own unique set of natural restrictions and advantages which make their strategies necessarily different, PSA [Singapore] do stand out for anyone clinically looking at best practices.”
Asked by Port Strategy to summarise the goals a successful transhipment hub should aspire to, Mr Howitt says it must ensure it attracts quality common carriers, through a structured pricing policy for feeder transhipment operators; protect those Common Carrier feeder networks, encourage maintenance of the best frequency of those networks, and in time they will have the largest possible ships and thus the lowest slot costs; avoid inter-terminal transfer costs between terminals in the same hub - this is a key weakness in ports with multiple terminal operators; and give feeders the same priority as mother vessels.
“If the feeder waits, the cargo doesn’t get to the outport on time and the purpose of the whole venture has failed. Cargo will next go direct or via another transhipment hub.”
Mr Howitt says the importance of efficient feeder connections will become more important as main line operators ship sizes grow.
“Ships will continue to grow in size as the 13,000 and 18,000-teu ships arrive and others trickle down, and so feeder sizes will also grow wherever the outports can cope with the size.
“Feeders must be ready to upgrade as required, and do so as quickly as the main line operator customers need to, most often in advance of the main line operators upgrade.
“The ‘Daily Maersk’ campaign has shown us all in the industry that after a two-year period of fighting costs with slow steaming and often poorer transits and reliability, our entire industry is again at a stage where it wants to compete with each other on having better transit times and service reliability.
“The common carriers must therefore be completely ahead of this curve as they are often either the beginning or the end of any main line operator chain, and the main line operator's service quality and reputation depends on the feeder getting it right,” he says.
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