Take it to the Limit

Shipping is the most efficient form of transport. It’s a mantra we hear a lot and in light of all the attention on the sector it’s probably worth unpacking the soundbite. We all know global supply chain logistics are a lot more complex than they first appear to be.

Let’s start with a definition: Efficiency is the (often measurable) ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result.

So, what do we mean when we think of shipping as ‘efficient’? It moves more freight per tonne mile compared to any other form of haulage. Which is great.

But, shipping is ‘efficient’ per tonne mile only because ships are very big and very slow compared to any other form of haulage transport.

To improve efficiency per tonne mile shipping’s response thus far has been, in the main, to increase the size of a vessel so as to improve its economies of scale, that is to carry more cargo so every unit of fuel used to move each unit of cargo is proportionately less. Larger ships enable lower emissions/fuel cost per tonne mile when the vessels are fully utilised, but if they aren’t then the economies of scale argument falls away.

Pushing a very large and very empty ship through the water isn’t efficient at all.

Large ships make it harder to match supply to demand. The response to that might be to slow down in order to use less fuel. Slower ships also allow cargoes to be consolidated to ensure a full vessel but both these solutions, which improve shipping’s ‘efficiency’, risks customers’ production processes and in turn is jeopardising the service shipping offers its customers.

Yesterday I heard a steel industry representative say he had to fly in raw materials because the available shipping service failed to be able to meet his critical deliver schedules.

Thinking about the ‘desired results’ part of our definition let’s suppose the shipping industry’s desired result is something like: to provide the most efficient form of transport to its customers so it can be as profitable as possible. In our steel import example, we can see that’s an opportunity lost for shipping – the transport business went to another mode of transport offering a better service. I suggest this poses a question about the efficiency of shipping. It’s truethat one-off situations will occur from time to time in any supply chain but to be most efficient we as an industry should be avoiding modal shift wherever possible. When we see it we should consider it a bit of a warning and that closer self-examination is needed.

At present the shipping system is not fully optimised and so long as it assumes it’s already doing everything it can it will remain so.

There’s a wealth of technology available that could help improve shipping’s service offering in terms of both energy and operational efficiency. From a bottom line perspective, it makes sense to examine how to be really efficient. Shipping is already very good, but could do better. And the principle beneficiaries would be the shipping industry itself.