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Logistics Session Part 2 Transportation

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Title: Logistics Session Part 2 Transportation


1
Logistics Session Part 2 - Transportation
  • Henry L. (Rick) Wen Jr.
  • VP Business Development Public Affairs
  • OOCL (USA) Inc.
  • 2006 AAFA International Sourcing, Customs
    Logistics Integration Conference
  • Savannah, March 22-24, 2006

2
Agenda
  • Introduction to OOCL
  • Record trade growth from Asia and Chinas impact
    upon US transportation infrastructure
  • California Crisis-Shipping Landscape-How cross
    industry collaboration improved results
  • Affect on cost and infrastructure investment
  • Future outlook and trends

3
Introducing OOCL
  • Hong Kongs largest container shipping company
  • Grand Alliance member
  • Publicly traded and privately held
  • 4M shipments 4.7B in annual revenue
  • China expert
  • ISO certified and process driven
  • Technology Innovation IRIS 2 CargoSmart
  • Highest industry return on revenue in 2004
  • Green Flag Award environmental recognition

4
World Container Flow 2005
TRANS-PACIFIC 18 million TEU 10.4 Growth
ASIA-EUROPE 12.2 million TEU 10.9 Growth
TRANS-ATLANTIC 5.4 million TEU 5.3 Growth
OTHER TRADES North-South 19.2 million
TEU Intra-Regional 16.1 million TEU
Source Drewry Consultants, 2005
5
Chinas Share of U.S. Import Volume
1995
2000
2005
Source PIERS Trade Horizons
6
Chinas Share of Trans-Pacific Imports
1995
2000
2005
Source PIERS Trade Horizons
7
Chinas apparel footwear trend
China market share China-US growth p.a.
Source US Census Bureau
8
Major Port Throughput
Source Drewry Shipping Consultants Ltd (figures
include empties and transshipment)
9
Volume Growth (m Teu)
Source Ports (Dec est.)
10
Projected Growth (POLA/POLB)
(in Million TEUs)
Source Marine Exchange of Southern California
11
2004 California Crisis
  • West Coast problem was compounded by many issues
  • Trade growth and inadequate customer forecasting
  • Shortage of longshore labor and lower
    productivity of new hires
  • Port congestion
  • State and Federal regulations
  • Intermodal equipment (railcar, locomotive) and
    crew shortages
  • Terminal crane capacity
  • Rail volume capacity (ramp, on dock rail limits,
    trackage pinch point at Cajon Pass)
  • Strained truck capacity and limited trailer
    availability
  • Chassis shortage
  • Larger Mega Ships
  • Rising costs of doing business

12
2004 Labor Shortage
No. of In-Service Cranes
Source www.pmanet.org
13
Shipping Landscape
  • New mega ships increase trade capacity
  • Global trade growth outpaces United States
    infrastructure, including port, railroad,
    trucking, terminal and warehouse.
  • Congestion delays reduce effective vessel
    capacity
  • Panama Canal approaches 100 capacity
  • Supply chains become pro-longed and segmented
    West (intermodal) and East (all-water)
  • Cross-industry collaboration and synchronized
    activities improved shipment performance
    efficiency after 2004 crisis Heres how

14
2006 Port Congestion Beyond 2006
  • US Ports Lag International Productivity
  • Throughput (Teu) per gross acre
  • East Coast /Gulf 4,100
  • West Coast 4,600
  • Major world ports 10,000 to 15,000

15
Port Terminal Capacity Constraint
Million TEU
Source SSA
16
Port Terminal Capacity Constraint
Source SSA
Million TEU
17
Cross Industry Collaboration Ocean Carrier and
Terminal Action
  • More labor, high capacity cranes and terminal
    equipment (resources)
  • Convert from wheeled to grounded operations
    increase terminal capacity (space)
  • Extend Terminals Hours of Service Pier-Pass
    appointment system to increase capacity (time)
  • Implemented on July 23, 2005
  • Over 30 of daily cargo moves during off-peak
  • 1 Million container milestone December 2005

18
Cross Industry Collaboration Ocean Carrier and
Terminal Action
  • Redeploy ships to East Coast and Pacific
    Northwest ports to balance port capacity (asset
    utilization)
  • Reduce terminal free time from 5 to 4 days to
    accelerate goods movement (velocity)
  • Implement 1st receiving dates for exports to
    minimize terminal congestion (space)
  • Synchronize block stowage and promote on dock
    rail to improve intermodal rail performance and
    maximize terminal efficiency (congestion)
  • Develop off-dock Container Yards to relieve
    terminal congestion (overflow capacity)

19
Cargo Interest
  • Order earlier and prepare to hold more inventory
    in your pipeline
  • Move information up your supply chain (at origin)
    and available at least 24 hours prior vessel
    loading
  • Align your delivery schedules with changes in the
    international delivery process
  • Focus more on time definite vs. time to market
    and avoid double dipping
  • Use cost of goods sold profit model (20 cents a
    kilo vs. 6 dollars a kilo?) to build your supply
    chain

20
Value per kg of shipment
Source US Census Bureau
21
Increased Cost of Liner Shipping
  • Bunker fuel and inland fuel
  • Additional labor
  • Terminal
  • Extended operation hours
  • Wheeled to ground operation (expensive yard
    machinery)
  • Terminal appointment system
  • Storage charges have increased
  • Equipment
  • Trade imbalance (import export) increases empty
    repositioning
  • Cost of equipment is up as steel costs doubled
  • Carriers are building larger vessels but
    equipment supply lags behind
  • Rail
  • Trucking

22
TSA Revenue Index Trending
23
Future Outlook Trends
  • Intermodal rail service improves
  • More Hub and Spoke shipments (inland
    distribution)
  • Less West Coast transloading
  • More East Coast distribution using trucks instead
    of rail
  • Integration of international with domestic
    transportation
  • International intermodal outpaces domestic growth
  • Railroads drive double stack intermodal
  • Smaller and more frequent shipments favor
    container vs. trailer
  • Cost and environmentally friendly for shipments
    gt700 miles
  • Domestic infrastructure changes to accommodate
    international
  • CPRR bans cross Canada intermodal trailers
    effective January 1st 2006 (others to follow)
  • TTX converting 48 car wells to 40 wells
  • New flatcar wells will be mostly 40

24
Future Outlook and Trends
  • Economy of Scale Asset Utilization
  • More and larger container vessels
  • More and larger consortia of carriers
  • More mergers and Acquisitions
  • Dont put all your eggs in one basket
  • Liner shipping logistics plays a more strategic
    role in supply chain including domestic
    applications
  • Technology drives standardized efficiency,
    shipment visibility and Home Land Security
    applications
  • Moving towards a global economy
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