We are delighted to report that in the month of November 2011, the Supply Chain Matters blog experienced the highest readership volume since our founding in 2008.  Our domain had over 51,000 visits last month, with over 21,000 being unique, first-time visitors.  Thus far in 2011, readership is up 40 percent, with reader duration times exceeding four minutes.

Once again we would like to express a shout-out and sincere thank you to all our readers. While we are not a big organization that spends lots of money on self-promotion, our readership volume and loyalty is a tribute to the fact that supply chain teams seek quality, unbiased content and perspective. We are also being  recognized  by others as one of the top ten blogs commenting on global supply chain management.

Look for more features and sponsors in 2012 as well as the publishing of our Annual 2012 Predictions starting next week.

Sincere thanks.

Bob Ferrari

Founder and Executive Editor

A little over three weeks ago, we penned a follow-on commentary in the wake of gross overcapacity among ocean container carriers, specifically that the leading carrier, Maersk Line, was launching a customer-focused innovation program to launch daily ship sailings from Asia to Europe. With more idle capacity, Maersk had the means to not only respond to customer needs for more flexibility in scheduling shipper container movements as well as insure more reliability in on-time arrivals. Our commentary noted that competitor lines had cried foul, and claimed that Maersk was attempting to gain further market share at the expense of the remaining carriers.

This week, the industry’s second and third biggest carriers have responded. Switzerland based Mediterranean Shipping Company (MSC) and France based CMA CGM have announced plans to jointly align capacity in a broad based partnership spanning several major ocean routes. The two privately-held and family-owned entities would form trade line partnerships to serve select Asia-Northern Europe, Asia-Southern Africa, and all South America routings. According to a report published in the Financial Times, this new alliance has the potential to overtake Maersk line, with the two lines together jointly representing 21.7 percent of container shipping capacity vs. 15.8 percent for Maersk. MSC has additionally invited other carrier lines to join this alliance in order to insure ships are operating at full cargo capacity. Controlling family members for both lines indicated in press interviews that these actions are required in order to respond to a rather challenging industry environment.

This announcement came shortly after Maersk indicated that it now plans to cut its capacity on Asia to Europe routings, which was noted as a sign that the Eurozone financial crisis is having an additional impact on international trade.  Maersk officials further noted that they would consider idling more capacity after the Lunar New Year in late January. In an article published in the Wall Street Journal, the head of Maersk’s North Asia noted that almost all carriers are now losing money on operations.  A further announcement came from Orient Overseas, which plans to cut Asia-Europe capacity by 20 percent.

Supply Chain Matters believes that carriers are now compelled to action in responding to the realities of gross excess capacity slowing international trade, and attempts by the leading carriers to lock down market share. The announcements are also a prelude to further industry consolidation or carrier exits occurring in 2012 as the strongest attempt to force exit of other carriers.

The open question is what will shipping rates look like in 2012?

While carriers have now announced programs to pool capacity, the industry is in the midst of a fight for profitability and in a highly uncertain global economy. If carriers collectively idle too much capacity, shippers are again back to the unpleasant situation of the novel set of economics that occurred during the previous economic downturn. Overall capacity will shrink, remaining active ships will run at lower speeds to save on operating costs and reserving container space will again become a challenge. There could be higher rates for time-sensitive or higher volume shipping routes.

We want to hear from ocean transportation shippers.  How is your organization planning for 2012 rates and service needs?

Bob Ferrari