In a sour economy, shippers urged to expand use of day-definite ocean service

Two senior scholars in operations and supply chain management today called on shippers to significantly expand their use of day-definite ocean container services to counter the effects of recession on global trade. In a report released by the Olin Business School at Washington University in St. Louis, Dr. Panos Kouvelis and Dr. Jian Li declared that shipping full-container loads with specific delivery dates is the logical next step in ocean service. Their findings were included in the research paper 'Managing the New Uncertainty,' published by the business school's Boeing Center for Technology, Information and Manufacturing (BCTIM). The research project was sponsored by global supply chain services leader APL Logistics. Day-definite service refers to the recently developed practice of delivering ocean cargo on a specific date agreed to by a shipper and carrier. Until now, the service has been aimed at less-than-container load cargo (LCL), that is, shipments that don't fill an ocean container and are transported with other shipments in the same container. Given the pressure a global recession is placing on supply chain managers to operate more efficiently, Kouvelis and Li say the time has come for widespread use of day-definite delivery for full-container loads (FCL). 'The rapid slowdown in global markets is driving a renewed focus on tightly managing intercontinental supply chain costs,' the researchers said in their report. 'Day-definite FCL service is a highly beneficial product innovation for progressive intercontinental supply chains and the managerial efforts to make them leaner.' Kouvelis, director of the BCTIM with a background in supply chain management; and Li, a former research fellow at the Center, said the benefits of day-definite service for full-container load cargo include:

  • Significant savings in total distribution cost;
  • Reduced supply chain variability; and
  • A boost for the environment since shippers can replace reliable but highly polluting airfreight with dependable ocean service.

'Reducing reliance on transport modes with heavy carbon emissions, such as air transport, is increasingly being viewed as a supply chain imperative,' the researchers noted. 'Using a day-definite service in lieu of airfreight can contribute significantly to the greening efforts of carbon-sensitive supply chains.' Day-definite ocean services can fast-track containerized shipments thanks to priority handling and processing at load and discharge ports. The shipments are moved inland via expedited team truck service directly to the customer's door.
 APL Logistics, in conjunction with US trucking company Con-way Freight, created the day-definite market for LCL cargo in 2006 with a guaranteed service called OceanGuaranteed'. It connects nine ports of origin in Asia with virtually any destination in the continental US and metropolitan Canada.

One year ago APL Logistics entered the FCL market with APL Guaranteed' Continental, a day-definite service to the US from the Chinese ports of Shanghai, Hong Kong, Chiwan, and Yantian.

Both services have grown significantly. More important for customers, they've posted on-time records of better-than-98%. Reliability is a crucial element of day-definite service.

In their research, Kouvelis and Li compared day-definite services for full-container load cargo with airfreight and standard FCL ocean services. Their findings: Day-definite service was 134% to 244% less expensive than air freight for total distribution cost, which includes transport, in-transit inventory and warehouse inventory costs. Day-definite service was even cheaper than regular FCL ocean services in many instances, especially when hidden costs such as penalties and chargebacks for late deliveries were factored in. As for reliability, the researchers said day-definite products had become 'virtually indistinguishable from traditional air freight.' Because o