Asian businesses are being affected by slow steaming – a method developed by shipping lines that reduces fuel consumption but increases travelling time – a recent survey shows.
Some 110 Asia-Pacific firms responded to the survey conducted by American logistics management firm BDP International to study the impact of slow steaming on their businesses.
A total of 58 per cent reported snags in their customer service because they could not deliver goods on time or meet their commitments, while 51 per cent felt the impact on their inventory because they were unable to get parts on time or were forced to hold more inventory. About 49 per cent had changes to their production schedules, while 27 per cent said cash flow was hit as billing and payments were delayed.
Despite the negative effects highlighted, slow steaming is gaining popularity among shipping lines. The method, used since the economic slowdown in 2009, involves ships travelling slower on long-haul routes.
This greatly reduces fuel consumption and greenhouse emissions, and improves the utilisation rates of ships as fewer are left unused.
Slow steaming raises the shipping time from Singapore to Los Angeles from 15 to 22 days, and from Singapore to European ports like Rotterdam from about 17 to 24 days, according to Mr Arnie Bornstein, BDP’s executive director for marketing and corporate communications.
‘Companies affected by slow steaming are doing what they can to adjust,’ he said. ‘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.’
Some 48 per cent of the firms said they responded to the longer travelling times by doing more advance planning, while 38 per cent increased the number of carrier companies they use to get the best combination of prices and travel times.
About 73 per cent of the firms feel that ocean carriers should pass on the cost savings of slow steaming by reducing their rates, while 36 per cent want to see the savings used to offset future increases.
The survey included firms in consumer goods, retail, health care and electronics. Another 180 firms from the Americas, Europe and the Middle East were also studied in the same survey, and they reported similar problems and responses.
But container liners have defended slow steaming by highlighting the environmental benefits and fuel savings amid rising oil costs and weak freight rates. ‘Customers are not enthralled, but they understand,’ said a Neptune Orient Lines (NOL) spokesman. NOL has added more vessels to its services to maintain its schedule of weekly port calls and to ‘better manage schedule reliability’.
To improve transparency in rates and charges, the firm has adopted a new formula for the calculation of fuel surcharge for its trans-Pacific routes that reflects the financial impact of slow steaming. This includes the savings from reduced fuel usage as well as the additional capital costs for adding more vessels and containers to NOL’s services.
Maersk Line’s Asia-Pacific chief executive Thomas Knudsen said his firm sees slow steaming as the ‘new norm’: ‘Our customers accept the speeds that we have now and the cost picture that we face, in view of rising bunker (fuel) prices.’
He said slow steaming creates a ‘buffer’ in Maersk’s network that allows it to speed up if something unforeseen happens. He also pointed to lower greenhouse gas emissions, which will help firms reduce their carbon footprint as end consumers start to make it part of their purchasing criteria.
