Maritime freight flows are the result of past supply chain design choices – if companies design global supply chains this results in global freight flows, comments Peter de Langen.
Supply chain design choices generally lead to investments (in assets, partnerships and the like) and thus cannot be changed overnight. Hence, the current maritime flows are the result of past supply chain design choices.
When contemplating the future of maritime freight flows, the best clue is to look at current and future supply chain design choices. One increasingly clear trend in these choices is a move away from ‘global supply chains’ and to increasing regionalisation.
Globalisation has thrived based on a set of favourable conditions, such as low trade barriers, a stable global economy without major disruptions, cheap and reliable transport and consumers attracted to global brands.
Some of these conditions have relatively recently turned less favourable. Free trade policies are reverted. For example, Japan incentivises moving production back to Japan and the US imposed trade barriers.
In addition, companies are much more aware of the risks of disruptions and prepare for a less stable global economy. Finally, consumers increasingly value ‘locally produced’ products, especially food but increasingly also products like clothing.
As a result, companies have regionalised supply chains, a process that was started a decade ago, and plan to continue to do so. A recent Cap Gemini report found organisations expect to increase the share of local supplies to 43 per cent, from the current amount of 36 per cent and to serve markets more from locally situated plants (50 per cent up from 43 per cent).
These supply chain design decisions may lead to faster growth of intra-regional flows than of global flows, especially of intermediate and finished products. All of this creates an ‘opportunity space’ for Roll-on Roll-off (ro-ro) shipping.
While in Europe, the majority of intra-European maritime flows are ro-ro outside Europe the lengthy and complicated border crossing procedures have impeded the development of strong ro-ro links. If intra-regional trade processes are further streamlined, then ro-ro may be able to finally make inroads in intra-regional trade outside Europe.
Some container shipping companies have started to offer ro-ro services in addition to container services. For instance, CMA-CGM offers ro-ro connections between North Africa and South Europe.
I would not be surprised if more carriers follow suit and the growth in this segment will turn out to be faster than the growth in the container segment.
First published @PortStrategy