Combating lead time uncertainty in supply chain for ocean shipping

The term “ Lead time “ typically denotes the duration between an entity placing an order for goods or services and actual receipt of those goods or services. In context of ocean shipping, it is the duration between initiating the shipment of ordered goods from an origin port and their physical arrival at the destination port which includes order processing time, loading time, ocean transit time and port handling time. Lead time is very crucial when designing a supply chain, particularly when establishing an inventory policy as it directly regulates the cycle stock. However, the uncertainty in lead time compels the managers to tackle a volatile situation for optimizing both design and operation and puts them into a complicated trade-off situation.

Lead time uncertainty is one of the greatest concerns for those supply chain where offshoring plays a pivotal role especially in manufacturing and for those firms wanted to penetrate a new market and extend their footprint beyond the local geographical regions. This lead-time uncertainty eventually compels a firm to make a trade-off between maintaining an excessive amount of safety stock or utilizing an alternative reliable mode of transportation. This decision can result in increased holding costs and risk of obsolescence or higher freight costs. Failing to address this issue potentially leads to a serious disruption in the supply chain. The ultimate outcome will be the loss of revenue and in severe instances ,?? dissatisfied customers may lead to a permanent loss of customers and damage in firm’s goodwill.

In the era of the global supply chain, many firms seek to expand their market presence in different geographical locations and outsource the products from relatively low cost and stable countries. This strategy aims to achieve an efficient supply chain surges popularity of offshoring in manufacturing and assembling at an exponential rate. Enterprises are more eager to manufacture their highly predictable and stable demand products in an off-shore facility to ensure an efficient supply chain. However, this presents an additional opportunity where it also added extra risks with one of the being uncertainty in lead time as it is needed to transport the inventory over a long distance with extended transit time. For large bulk shipping, ocean liners undoubtedly offer the best option to achieve a cost-efficient and safer mode of transportation.

Ship owners and managers including the shippers / freight forwarders working jointly to optimize the operation to ensure a streamlining transportation process. Some crucial barriers are still in place hindering the optimization process and leaving a long footprint of uncertainty in lead time for entire supply chain.

The modern world is inevitably dependent on real time information and valid data regarding any ongoing process or operation. Information exchange increases the visibility throughout the entire process which helps the firm to take better decisive action. But in case of ocean shipping, establishing a rigorous visibility is considered as a great challenge as several parties are involved which needs a good coordination among themselves and modern cutting edge information technologies to be introduced and a common virtual platform to be used by all parties. However, it will be quite difficult to achieve, as different players are involved and generally they like to optimize their own operation instead of the entire process. But the greater interest lies on optimizing the whole process and a strong coordination and profit sharing indenture among the parties can be the trigger to overcome the barrier for expanding visibility.

Till the date, in liner shipping, ETA accuracy is about 70-80 % which is considered a bottleneck for effective logistics planning in supply chain. Accuracy includes both in early or late arrival, typically not in time.

Route optimization, better precise weather forecasting, vessel speed and sea current, mechanical breakdown, vessel’s overall condition including optimized hull design and maintenance are those facts, effectively impacts the vessel ETA.

Route optimization is better described by choosing the best route that avoid storms, strong undercurrents, and simple downpours and high waves not only provides safety but also allows the ship to reach the destination much faster, saving time and fuel. The new state of the art technology is to be introduced in the era of artificial intelligence which will gather a lot of valid data regarding weather condition in different time in different places including the sea current, sea condition, any special effect on weather over a predictive time basis, adverse effect of current climate change with future predictive trends can be included to formulate a prescriptive model that may suggest one of the best route with minimum amount of errors. Tracking of errors is crucial as it will be used as feedback, contributing to the enhancement of model decision accuracy.

Modern highly advanced ships are being built using the cutting edge technology in the field of both hull design and machinery development prioritizing the environment over others. New age ship building industry is committed to deliver the better solution for future to suit both technological and commercial aspect enabling the vessel to achieve optimized speed capability with lowest possible amount of fuel consumption and less adverse impact on environment makes them more competitive in markets.

The key responsibilities of vessel’s technical management is to plan and oversee the vessel’s “ Planned Maintenance System “ including regular maintenance of ship’s machineries as per the maker’s instructions to avoid any kind of breakdown maintenance which may affect the vessel’s ETA as it delays the port arrival. In extreme case the vessel may suffer unseaworthiness restricting her to call ports unless the condition has not been rectified. The process in the maritime transportation industry is evolving and to keep pace in this dynamic environment the whole PMS is to be reviewed at a certain interval regularly and necessary steps to be taken to be updated. An integrated ERP system can be introduced onboard the ship with sufficient visibility and transparency allow the system to work on the basis of common interest instead of using it as a centralized system.

The majority of ETA uncertainty is derived from inefficient port management and lead time uncertainty from improper cargo handling activities. In this aspect, sea port traffic management is crucial to allow the vessels to berth on time. Availability of sea pilots, demarking the anchorage areas, specifying a TSS (Traffic Separation Scheme) to give prompt transit to other vessels going through the territory to keep the port traffic system uninterrupted and increasing the draft capacity by regularly dredging the channels. Deep sea ports are always considered a good option, as river basin ports are highly dependent on the tidal influences and the berthing and sailing of ships in ports are contingent upon the tides. It may also impose restrictions on vessel draft, which could prevent large tonnage vessel to come directly alongside to the jetty. So, the large ships are compelled to unload partly, while staying in outer anchorage to overcome the draft restrictions increases both time and cost even with added risk of cargo damage as handling will be increased. Cargo handling in ports is identified as one of the greatest potentials of lead time uncertainty due to the various factors directly involved in the process. Cargo handling capacity, latest technology, sufficient equipment, location of port, skilled workers, system automation, weather conditions in port area regulate the whole cargo handling process. Expanded and flexible cargo handling capacity always add some ease towards handling any rush and streamline the process. Advanced automation technology can be employed in cargo handling, as most of the performed jobs are repetitive, may reduce the problem of skilled worker scarcity in a great extent and related human errors can also be avoided and will accelerate the whole process.

With time, the supply chain has evolved into a shock absorber for the companies enabling them to mitigate disruptions and enhance resilience. Uncertainty in lead time always transforms the process into a more complex condition to handle, and the firms need to take other combating measures which ultimately indulge added risk into the process, which may leave the system into a vulnerable condition. Uncertainty in lead time for ocean liners can be systematically reduced to a great extent with good coordination among the stakeholders, and the entire industry can thrive instead of survive if they commit to achieving the global interest.