In the intricate web of global logistics, the efficient movement of cargo is paramount. However, one often-overlooked challenge that permeates the industry is empty container logistics. Those who work in the logistics industry know that empty container logistics and container repositioning is one of the industry’s biggest headaches.
Empty container repositioning is anything but a simple procedure. On top, it’s a costly one, too. In fact, moving empty containers costs the industry more than $20bn annually.
To get a better understanding of the challenges and requirements involved, let us look at the container logistics flow and why container repositioning is a crucial step of the greater supply chain.
What is the empty container problem?
Shipping vessels operate on fixed schedules, container movements do not. Factors such availability, type of cargo, pickup location, export and import parties involved, as well as the destination all play an important role in container movements.
Trade between two countries is typically imbalanced. This means that when a container is unloaded, there is often no new cargo available to fill it immediately. Generally, it takes several weeks to find an export customer to load the container and transport it back to the port.
Due to this imbalance in import and export markets, European and American ports have ended up with a large surplus of empty containers, while Asian ports are experiencing a deficit.
At the European and American ports, this situation quickly escalates with many shipping carriers facing the same problem causing congestion, handling delays, and strains infrastructure. Hence, ports charge high-priced storage fees to discourage carriers to keep their containers waiting at the port for new cargo.
Every third container is transported empty because of the trade imbalance, as a container owner stands to make more money by making the container available in a high demand market quicker. But, container repositioning is a very costly and time-consuming process.
The shipping line passes on part of the issue onto a freight forwarder by involving them in the administrative hassle that is container repositioning. The carrier will also charge detention fees if the container is not returned within its allotted time. We have been accustomed to following legal disputes between freight forwarders and container owners due to this very situation.
Shipping carrier challenges with empty container management
- Lost revenue and sales opportunities
- If a container is empty and stuck in an import dominant location, the container owner can simply not make money by leasing it where it is needed.
- Slower asset turnover
- The shipping company needs to ensure containers are available where they have high export demands, meaning they need to make sure the empty container gets transported back to its probable point of origin. A process that can take weeks.
- This could also mean significant delays for exporters, if there are no available containers at the point of origin.
- Additional costs
- Moving an empty container means not carrying cargo from a paying customer. The shipping company needs to bear the transport costs in this case for the container movement, including handling charges at terminals and ports (as opposed to being able to charge a shipper if it was carrying cargo)
- If a carrier does not immediately transport a container back to its point of origin, they also need to pay storage fees at port storage yards.
Measures to manage empty container repositioning
With container repositioning being such an expensive effort, container owners are actively trying to manage and steer container repositioning to mitigate losses. These are some measures employed:
- Surcharges for empty container repositioning or container imbalance
One tactic is to guide empty container returns to a location that is the most advantageous to the container owner. They do that by setting different prices for empty container returns at different depots. This way, they can drive returns to a more favorable location for the container owner and pass on part of the transportation cost to the shipper. These surcharges are constantly changing depending on supply and demand of empty containers at particular container depots.
- Lower freight rates for return journey
Shippers of lower value commodities often find it too expensive to ship their goods in containers, as it will raise the price of goods with a large percentage. However, if they are offered a lower shipping rate, the container option becomes more attractive.
- Promote use of shipper owned containers
If the carrier does not own the container, when it is empty it is no longer their obligation to ensure they are available at the point of origin. Instead, the container owner is responsible for ensuring the empty container moves to where it is needed. To promote the use of shipper owned containers, a carrier may offer more attractive freight rates.
- Hinterland triangulation
If possible, instead of returning the empty container to the point of origin, the container owner attempts to send the container directly for loading of new cargo in the vicinity of the now empty container. Naturally, this way the shipping carrier avoids the costs associated with returning empty containers, but this is only feasible if export cargo is available.
- Tech solutions for better planning
Today, most container owners over-forecast demand as they rely on gut feelings and outdated processes for planning. Leveraging technology, a carrier can plan container movements better and minimize the proportion and probability of empty containers. Demand forecasting at the origin and matching return loads at destination is easier done with the help of a digital solution.
We at rouvia champion tech solutions, which is why we wrote an article on why you should adopt a digital strategy for better hinterland transport management.
Container owners are not the only ones trying to solve the empty container problem. In the last couple of years, we have seen innovative solutions such as foldable shipping containers or one way container systems.
None have yet to transform the market, which is why the freight forwarder is still heavily involved in empty container logistics.
The role of a freight forwarder in empty container logistics
Before a shipper can load their goods into a container, they need to receive the container first. A freight forwarder arranges this transport chain that includes container pickup at a depot and then the transport to the shipper for loading of goods.
After a container has been unloaded at a customer warehouse, the empty container needs to be returned to a designated container depot or container yard within the agreed allotted time. The freight forwarder arranges the transportation for the final leg of container repositioning.
3. Inland transportation
An empty container needs to be picked up from a container depot facility so that the shipper can load it with their goods. The freight forwarder arranges and schedules the empty container pickup. After the full container has been delivered and unloaded at is final destination, the empty container needs to be transported to a container depot again. The forwarder then follows the same procedure for its return to a depot.
All of these scenarios are fairly straightforward. A freight forwarder agrees with the container owner where the empty container will be collected from or delivered to. Though, arranging these transports can be inefficient and time-consuming.
Manage empty container flow with rouvia
rouvia helps you to easily manage the empty container logistics with our empty container management feature. With our freight management system, you can request pick-up or drop-off of empty containers for individual transports with the click of a button.
Whenever you define the pick-up address and/or the drop-off address as a warehouse, you are automatically given the choice of including the container depot address for pick-up or drop-off of the empty container. This way you can better plan loading and unloading times according to capacity.
Simply book the empty container repositioning in a bundle with the pre- and/or post carriage when you book your transport with rouvia. It’s that easy to ensure the empty container gets picked up or delivered on time. Contact us to learn more about rouvia's freight management system now.