Why short-sea shipping should succeed in the United States
Although popular in Europe, short-sea shipping remains underutilized in North America despite its potential to offer cost-effective service with low greenhouse gas emissions.
Natasha Horowitz is a consultant in the Global Commerce and Transport Practice at the economics research firm IHS Global Insight. Prior to her current position, she worked as an economic consultant and an economic analyst for the U.S. Department of Transportation's Volpe National Transportation Systems Center.
Although popular in Europe, short-sea shipping remains underutilized in North America despite its potential to offer cost-effective service with low greenhouse gas emissions. In the United States, short-sea shipping encompasses the domestic movement of goods along the coasts and through the St. Lawrence Seaway and the Great Lakes. Its use is limited, and it moves only a marginal amount of U.S. domestic goods. It may not be the mode of choice for shippers that require just-in-time delivery, but short-sea shipping can deliver goods in a timely, reliable manner and at a good price. It also offers a relatively cost-effective, safe, and low-emission alternative for transporting goods between coastal cities.
Short-sea shipping has the potential to play a greater role in two significant markets. First, it is suitable for transferring imports from large hub ports to smaller "spoke" locations, in what is known as the "feeder ship" market. Second, shortsea vessels can move goods between coastal U.S. cities, running parallel to major north-south highways and railways.
Article Figures
[Figure 1] Short-sea shipping of U.S. domestic freight, 1997-2007Enlarge this image
The main advantage of short-sea shipping is that it alleviates infrastructure congestion, particularly around major ports. When you consider that the volume of domestic shipments is expected to increase by 24 percent between 2007 and 2027 (from about 13.8 billion to 17.1 billion short tons) without a corresponding increase in infrastructure, it seems logical that short-sea shipping should gain a more prominent place in the U.S. transportation network. After all, one small vessel with a capacity of just 400 TEUs (20-foot equivalent units) eliminates 400 trucks from a highway. So, for example, using short-sea vessels to move incoming container traffic from the Port of Los Angeles/Long Beach to nearby feeder ports such as San Diego could help ease the notorious highway congestion in Southern California. It also could improve port throughput and decrease dwell time by reducing the number of containers waiting to be loaded onto chassis or railcars.
Even though short-sea shipping competes with north-south long-haul trucking, it can also create new opportunities for short-haul trucking companies. These motor carriers can form partnerships with shippers to deliver goods from secondary ports to end users. Short-sea shipping also may create a need for new warehousing and distribution opportunities at secondary ports.
Moreover, the mode provides an attractive alternative for shippers that want to reduce their carbon footprint and fuel costs. It allows for the consolidation of multiple truck shipments onto one vessel, many of which are now able to run on low-sulfur diesel fuel. While a truck can move one ton of freight 155 miles on one gallon of diesel, a typical barge or short-sea vessel can move one ton of cargo 576 miles using the same amount of fuel.
Despite all of these advantages, short-sea shipping, with its limited network, still holds a very small share of the domestic freight market. In 2007, just over 300 million short tons of domestic freight moved coastwise and lakewise, a decline of 21.9 percent from the 385 million short tons carried by barges and feeder vessels in 1997 (see Figure 1). These shipments, which include both domestic and import tonnage, accounted for about 2.2 percent of the total freight moved within the United States in 2007.
These numbers pale in comparison with the volume of short-sea shipping in the European Union (EU). More than 40 percent of the EU's freight moves along the coast and on inland waterways. The addition of inland waterway traffic to coastwise and lakewise shipments in the United States increases water transport's share of domestic tonnage to only about 6.7 percent in 2007.
Vessels on the Great Lakes have long carried bulk commodities, including iron ore, coal, and grain, for manufacturers, power plants, and end users in the U.S. Midwest and in Canada, but coastwise shipments have remained more limited. Nevertheless, more coastal initiatives have been emerging in recent years. Successful initiatives are adding value and flexibility to local supply chains and often complement rather than compete with railways and motor carriers. One example is the Port Inland Distribution Network (PIDN) of the Port of New York and New Jersey. In addition to the distribution of cargo from the port by rail and truck, barges move containers to the nearby ports of Bridgeport, Connecticut; Camden, New Jersey; Providence, Rhode Island; and Boston, Massachusetts, helping to reduce air pollution and alleviate congestion on the busy I-95 highway corridor that runs along the Northeastern coast of the United States.
Fortunately, short-sea shipping is beginning to attract a greater degree of federal support. The U.S. Maritime Administration is currently leading the Marine Highway Initiative (MHI), which conducts public outreach to advocate short-sea shipping's benefits to the public. It is working with other modes, private entities, and state and local governments to identify projects for expanding the short-sea shipping network. In addition to efforts by the St. Lawrence Seaway Development (U.S.) and Management (Canada) corporations, the U.S. Department of Transportation is collaborating with its Transport Canada counterpart to further encourage shipping on the Great Lakes. On January 22, 2009, the U.S. House of Representatives introduced the Short Sea Shipping Promotion Act of 2009, which would exempt certain cargoes from the harbor maintenance tax.
In short, federal, state, and port authorities are beginning to recognize that short-sea shipping provides an environmentally sustainable way to respond to continued growth in trade, consumption, and shipping. In addition, short-sea shipping does not require investment in extensive fixed infrastructure, aside from ports. Furthermore, an expanding short-sea industry could spur shipbuilding in the United States because of the Jones Act, which requires that the vessels participating in coastal trade be built, crewed, and operated domestically.
In the meantime, short-sea operators should actively court motor carriers and rail lines in order to form partnerships and offer greater flexibility to customers. Short-sea shipping companies must be able to offer a seamless transition of both containerized and bulk goods from ports to other modes of transportation. Motor carriers, in turn, can expand their area of coverage by offering flexible, "greener" options with a short-sea component. For their part, shippers should explore short-sea shipping options to see how this mode can fit into their supply chains. The savings in both cost and emissions may be well worth the consideration.
Supply Chain Xchange Executive Editor Susan Lacefield moderates a panel discussion with Supply Chain Xchange's Outstanding Women in Supply Chain Award Winners (from left to right) Annette Danek-Akey, Sherry Harriman, Leslie O'Regan, and Ammie McAsey.
Supply Chain Xchange recognized four women who have made significant contributions to the supply chain management profession today with its second annual Outstanding Women in Supply Chain Award. The award winners include Annette Danek-Akey, Chief Supply Chain Officer at Barnes & Noble; Sherry Harriman, Senior Vice President of Logistics and Supply Chain for Academy Sports + Outdoors; Leslie O’Regan, Director of Product Management for DC Systems & 3PLs at American Eagle Outfitters; and Ammie McAsey, Senior Vice President of Customer Distribution Experience for McKesson’s U.S. Pharmaceutical division.
Throughout their careers, these four supply chain executive have demonstrated strategic thinking, innovative problem solving, and effective leadership as well as a commitment to giving back to the profession.
The awards were presented at the Council of Supply Chain Management Professionals (CSCMP) annual EDGE Conference in Nashville, Tenn. In addition to the awards presentation, the leaders discussed their leadership philosophies and career path during a panel discussion at the EDGE conference.
The surge of “nearshoring” supply chains from China to Mexico offers obvious benefits in cost, geography, and shipping time, as long as U.S. companies are realistic about smoothing out the challenges of the burgeoning trend, according to a panel today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
Those challenges span a list including: developing infrastructure, weak security, manual processes, and shifting regulations, speakers said in a session titled “Nearshoring: Transforming Surface Transportation in the U.S.”
For example, a recent Mexican government rail expansion added lines to tourist destinations in Cancun instead of freight capacity in the Southwest, said panelist Edward Habe, Vice President of Mexico Sales, for Averitt. Truckload cargo inspections may rely on a single person looking at paper filings on the border, instead of a 24/7 online system, said Bob McCloskey, Director for Logistics and Distribution at Clarios, LLC. And business partners inside Mexico often have undisclosed tier-two, tier-three, and tier-four relationships that are difficult to track from the U.S., said Beth Kussatz, Manager of Northern American Network Design & Implementation, Deere & Co.
Still, dedicated companies can work with Mexican authorities, regulators, and providers to overcome those bottlenecks with clever solutions, the panelists agreed. “Don’t be afraid,” Habe said. “It just makes sense in today’s world, the local regionalization of manufacturing. It’s in our interest that this works.”
A quick reaction in the first 24 hours is critical for keeping your business running after a cyberattack, according to Estes Express Lines, the less than truckload (LTL) carrier whose computer systems were struck by hackers in October, 2023.
Immediately after discovering the breach, the company cut off their internet, called in a third-party information technology (IT) support team, and then used their only remaining tools—employees’ personal email and phone contacts—to start reaching out to their shipper clients. The message on Day One: even though the company was reduced to running the business with paper and pencil instead of computers, they were still picking up loads on time with trucks.
“Customers never want to hear bad news, but they really don’t want to hear bad news from someone other than you,” the company’s president and COO, Webb Estes, said in a session today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
After five or six painful days, Estes transitioned from paper back to computers. But they continued sending clients daily video updates from their president, and putting their chief information officer on conference calls to answer specific questions.
Although lawyers had advised them not to be so open, the strategy worked. It took 19 days to get all computer systems running again, but at the end of the first month they had returned to 85% of their original client list, and now have 99% back, Estes said in the session called “Hackers are Always Probing: Cybersecurity Recovery and Prevention Lessons Learned.”
As the final hours tick away before a potential longshoreman’s strike begins at midnight on the U.S. East and Gulf coasts, experts say the ripples of that move could roll across the entire U.S. supply chains for weeks.
While some of the nation’s largest retailers were able to pull their imports forward in recent weeks to soften the blow, “the average supply chain is ill-prepared for this,” Tom Nightingale, the former CEO of AFS Logistics, said in a panel discussion today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
Despite that grim prognosis, a strike seems virtually unavoidable, CSCMP President & CEO Mark Baxa said from the stage. At latest report, the White House had declined to force the feuding parties back into arbitration through its executive power, and a voluntary last-minute session had failed to unite the International Longshoremen’s Association (ILA)’s 45,000 union members with the United States Maritime Alliance that manages the 36 ports covered under their expiring contract.
The ultimate impact of a resulting strike will depend largely on how long it lasts, the panelists said. With a massive flow of 140,000 twenty foot equivalent units (TEUs) of shipping containers moving through the two coasts each week, each day of a strike will require 7 to 10 days of recovery for most types of goods, Nightingale said.
Shippers are desperately seeking coping mechanisms, but at this point the damage will add up fast, whether a strike lasts for an optimistic “option A” of just 48 to 72 hours, a pessimistic “Option B” of 7 to 10 days, or even longer, agreed Jon Monroe, president of Jon Monroe Consulting.
The first full day of CSCMP’s EDGE 2024 conference ended with the telling of a great American story.
Author and entrepreneur Fawn Weaver explained how she stumbled across the little-known story of Nathan Green and, in deciding to tell that story, launched the fastest-growing and most award-winning whiskey brand of the past five years—and how she also became the first African American woman to lead a major spirits company.
Weaver is CEO of Uncle Nearest Premium Whiskey, a company she founded in 2016 and that is part of her larger private investment business, Grant Sidney, Inc. Weaver told the story of "Nearest" Green—as Nathan Green was known in his hometown of Lynchburg, Tenn.—to Agile Business Media & Events Chairman Mitch MacDonald, in a keynote interview Monday afternoon.
As it turns out, Green—who was born into slavery and freed after the Civil War—was the first master distiller for the Jack Daniel’s Whiskey brand. His story was well-known among the local descendants of both Daniel and Green, but a mystery in the larger world of bourbon and a missing piece of American history and culture. Through extensive research and interviews with descendants of the Daniel and Green families, Weaver discovered what she describes as a positive American story.
“I believed it was a story of love, honor, and respect,” she told MacDonald during the interview. “I believed it was a great American story.”
Weaver told the story in her best-selling book, Love & Whiskey: The Remarkable True Story of Jack Daniel, His Master Distiller Nearest Green, and the Improbable Rise of Uncle Nearest, and has channeled it into an even larger story with the founding of the brand. Today, Uncle Nearest Premium Whiskey is made at a 323-acre distillery in Shelbyville, Tenn.—the first distillery in U.S. history to commemorate an African American and the only major distillery in the world owned and operated by a Black person.
Weaver and MacDonald's wide-ranging discussion covered the barriers Weaver encountered in bringing the brand to life, her vision for where it’s headed, and her take on the supply chain—which she said she views as both a necessary cost of doing business and an opportunity.
“[It’s] an opportunity if you can move quickly,” she said, emphasizing a recent project to fast-track a new Uncle Nearest product in which collaborating with the company’s supply chain partners was vital.
Uncle Nearest Premium Whiskey has earned more than 600 awards, including “World’s Best” by Whisky Magazine two years in a row, the “Double Gold” by San Francisco World Spirits Competition, and Wine Enthusiast’s “Spirit Brand of the Year.”
CSCMP’s EDGE 2024 runs through Wednesday, October 2, at the Gaylord Opryland Hotel & Convention Center in Nashville.