Did you know that freight forwarders spend a staggering $20 billion each year on repositioning empty containers? This astronomical figure surpasses the GDP of some countries, highlighting the magnitude of the problem faced by the logistics industry. But what exactly is empty shipping container repositioning, and why does it occur?
Understanding Empty Container Repositioning
In an ideal world, every shipping container would be fully utilized on every journey. However, this is far from reality. Often, a carrier will have an excess of empty containers at one port, while simultaneously lacking containers for shipments from another port. This necessitates the repositioning of empty containers to the deficient port, hence the term ’empty container repositioning’.
Empty shipping containers occupy the same space on a ship as full ones, resulting in equivalent costs for their transportation. However, since these containers are devoid of cargo, carriers bear the cost themselves, eroding their profits. If only a small number of shipping containers were shipped empty, the costs would be manageable. Unfortunately, on average, containers spend a staggering 56% of their lifespan idle or empty, surpassing the time they spend shipping cargo and generating revenue.
But why does the logistics industry waste so much potential space when profit margins are already tight? Let’s delve into the causes behind empty container repositioning.
The Causes of Empty Container Repositioning
Ports that import more than they export accumulate empty containers due to the lack of goods to fill them. Conversely, ports that export more than they import face container shortages. To address this trade imbalance and prevent port congestion, companies must transport empty containers from surplus ports to deficit ports, tying up capacity and increasing transportation costs. The most prominent container imbalance exists between the West and Asia, with European and American ports often having a surplus while Asian ports experience shortages.
Carriers would prefer to wait at ports for new cargo if they could store containers for free. However, the reality is that storing an empty container at a port can cost hundreds of dollars, depending on the duration. While carriers can usually store containers at a port for around five days at no charge, exceeding this limit incurs a daily cost of up to $100. The exact storage expenses vary based on the shipping company’s contract with the port. Consequently, it often becomes more cost-effective for carriers to move empty containers rather than wait for them to be shipped when filled.
During periods of high export demand in certain regions, carriers must ensure an adequate supply of containers at those ports. To meet this demand, carriers prioritize the rapid repositioning of empty containers to these ports. For example, during the COVID-19 pandemic in 2020 and 2021, as consumers shifted their spending from services to tangible goods, imports surged. Carriers faced immense pressure to swiftly transport empty containers from the US and Europe to Asia, resulting in as much as 75% of containers being shipped empty.
Outdated Logistics Planning
The logistics industry remains resistant to technological advancements, relying heavily on outdated practices such as using Excel for container repositioning planning. Such antiquated methods hinder efficient planning, leading to a higher prevalence of empty container shipments. Although advanced logistics technology utilizing AI exists to facilitate efficient empty container repositioning, many companies are reluctant to adopt these solutions.
Lack of Cooperation Between Carriers
Consider a scenario where Carrier A needs to ship cargo from Sweden to the US but lacks sufficient containers, while Carrier B has surplus containers in Sweden and is repositioning them empty to the US. If Carrier B were to allow Carrier A to utilize their containers, both companies would save costs, improve efficiency, and contribute to environmental sustainability. This scenario occurs frequently, given the millions of containers moved globally each day. However, intense competition among carriers and leasing companies leads to reluctance in sharing container positions and volumes. Consequently, setting up container pools to mitigate empty container repositioning becomes challenging.
Addressing the Empty Container Repositioning Challenge
Empty container repositioning poses significant financial and operational challenges for the logistics industry. To mitigate these issues, collaborative efforts, innovative technologies, and proactive planning are imperative. Embracing data-driven solutions and fostering cooperation between carriers are key steps toward optimizing container utilization, reducing costs, and increasing sustainability. By tackling this substantial problem head-on, the logistics industry can unlock substantial efficiencies and drive positive change.