How the solution to a West African shipping problem may well prompt big business to think small to survive
 An article in Accra's Modern Ghana magazine touched on a troubling problem that has befallen smaller beneficial cargo owners (BCOs), who may not be big, but are numerous enough to be taken seriously.
These traders inhabit particular stages in the supply chain, from producers to last-milers for whom ships and shipping have got too big to accommodate their need of speed and reliability - needs that have become more acute with the explosive growth of e-commerce.
This underappreciated problem came into focus in an article by Maxwell Ampong, a West African agri-commodities trader and the CEO of Ghana's Maxwell Investments, who wrestled with the question of why there are so few containers available in the world today.
He eventually focused more sharply on an issue more relevant for his readers, small and medium sized enterprise (SME) owners. It is that the one-big-size-fits all approach that global shipping has adopted does not suit his readers. Nor is it likely to suit millions of SMEs in the rest of Africa, and indeed around the world in the Americas and Asia.
Because of the ubiquitous internet, now accelerated by the stay-at-home Covid scare, e-commerce has boomed and is likely to continue to do so. The trouble is, that while manufacturing and marketing is moving with commendable speed, the delivery function has failed to deliver what is needed to sustain healthy growth of online shopping except in the area of costly luxury goods.
From the mega supply chain's point of view big is beautiful. Worries about late deliveries caused by slow steaming was answered by increasing ship size, were carried on at the expense of last mile just-in-time delivery.
The major carriers and retailers counterattacked with the "Four Corners" strategy that positioned mega warehouses at the four corners of the North American continent. Such solutions were mimicked in Europe. Now, it no longer mattered if the ships were slow in coming. For the majors, it was problem solved. There was no lack of truckable inventory at hand when stock keeping items ran short in one outlet or another.
That suit the likes of Hotpoint, Target, Walmart, Carre-Four, Metro and Sainsbury, but not the small operator who wants his stuff as quickly delivered as reasonably can be expected, and not languishing in the middle of a container in a stack amidships on some slow steaming vessel leisurely going from port to port long before the consignment arrives where there it was needed immediately.
Low reliability performers, such at the Mediterranean Shipping Co, had to suffer the bleak waterfront jibe, that MSC really stood for "Maybe she come".
What was happening was that there was so much cargo waiting to be loaded onto shipping vessels, and the ships are ready, but shipping containers were scarce.
"The situation is disastrous in the reefer world. Let’s take frozen poultry products. Everybody eats chicken, generally speaking. The sale price of one carton of chicken leg quarters (broiler) has increased considerably," said Modern Ghana's Mr Ampong.
Frozen products face a particular challenge because about 10 per cent of the world’s shipping containers are refrigerated. Reefers are meant to transport perishable products like seafood and poultry. While all of freight is affected, it’s easy to see why freight involving reefers face a more acute challenge.
Those that prepared for a day when consumers do not need to enter brick-and-mortar stores for shopping items have literally made billions of dollars.
Mr Ampong said he spoke to a company called, Innovative Distribution Solutions (IDS). It had an innovative approach to the shocks that Ghanaian supply chains are suffering because of Covid.
IDS has created an app where, in a world moving further away from brick-and-mortar shops, one can create and sell products on a small scale or on a large scale, all from the convenience of your mobile phone, anywhere in the world.
A lot of competitors are in the eMarket space. What makes IDS stand out is the extensive warehousing and cold storage infrastructure for frozen products well positioned across the country.
Remember when I said consumers in Ghana are not accustomed to buying broilers from a phone or a laptop? IDS makes that possible with an app that is populated with an impressive and growing number of wholesalers, retailers, and even a good number of insulated aboboya’s that make frozen product deliveries right to your doorstep.
In effect, one can direct delivery of dry stock into an IDS warehouse, or delivery of your frozen products into an IDS cold store, and once your eStore on the IDS app is loaded with your very own stock.
MNE Shipping explains their project, by having one think of the supply chain as the "different stages of things". Because a thing overseas doesn’t just land in Ghana. It passes through many stages.
They’ve broken it all down into many stages and have taken a critical look into how to make the operations of each stage very efficient, by improving value for money.
Traditional shipping lines had one main objective: to deliver your product at the lowest cost. So over the years, the ships got bigger and bigger. That made them slower and slower. And by their sheer volume of containers per vessel, they made multiple stops along the way. The result of this is that delivery cost per unit gets reduced, but delivery time got way too long.
Said Mr Ampong: "MNE Shipping believes that the shipping industry should be speeding up shipments, not slowing them down. Traditional shipping companies got carried away by their unit economy calculations, with their super mega ships. But they didn’t account for the law of unintended consequences elsewhere in the Ghana man’s pocket."
The solution, as he sees it, is to utilise medium-sized shipping vessels that are fast and singularly headed directly for Ghana. So, delivery periods becomes shorter and the economies of scale still do kick in because each delivery by sea from MNE is a shipload nonetheless.
"I believe MNE hit that critical clientele mass that allows it to do regular shiploads with ease. All this is towards reducing that delivery cost per SKU (stock keeping unit) from an overseas factory to your doorstep," said Mr Ampong.
Container shortages have changed the working dynamics of many trading companies since Covid. As many economies recover, things will only get worse before they get better because global demand for shipping services will rise.
The global shortage of shipping containers will persist for a much longer while than we would like.
Some new expenses will have to be met. Crew costs on a small ship are as big as they are for a big ship, so slot costs can only be expected to rise. Faster ships burn more fuel. This appeared to be less of a problem as oil was being found almost everywhere so prices looked stable. But that is now questionable with the growth of intrusive regulation and a manic if not maniac campaign to be globally carbon free, which seems to make no sense beyond children and bureaucrats.
Nonetheless, evidence is growing of a paradigm shift is in the works as conditions change, giving rise to exigencies that will induce the world to change its ways - and in the way it does business. |
