Moving vehicles by containers is becoming more common for shipping vehicles in lower volumes and higher frequencies, particularly to and from developing markets. But the potential benefit might be farther inland than at sea, reports Malcolm Wheatley
Even a decade ago, the conventional wisdom on shipping vehicles by container was absolute: don’t. Ro-ro was the way to go, and containers added cost, complexity and capacity constraints. Roll the clock forward, and shipping by container has become a trend. More to the point, it’s come out of the closet, and is often mainstream practice particularly for carmakers outside Western markets. “There’s been a distinct upturn in enquiries,” says Richard Cox, president of Kar-Tainer International. “We’re hearing from Indonesia, Thailand, India and China, and for export shipments, as well as domestic movement.” But questions still arise as to which markets and vehicles make sense for shipping by container.
The answers are not a little influenced by the twin themes defining the current automotive industry: recession and globalisation. Recession has driven down container shipping rates even as ro-ro vessels have been mothballed or put on less frequent schedules. And as the number of cars being shipped has fallen, containers have proved a handy way of shipping small batches of vehicles that would be uneconomic by ro-ro. Globalisation, too, has seen new vehicle flows spring up with emerging Indian and Chinese manufacturers to Africa, the Middle East, South America as well as Europe in some cases.
The routes and volumes don’t always lend themselves to ro-ro, leaving containerisation as a logical alternative. Shippers, too, have become cannier at making better comparisons of the costs of the competing ro-ro and container solutions. Ro-ro’s ocean leg will almost certainly be cheaper, but a containerisation shipment that terminates at a dealer or inland compound won’t entail portside and handling fees. Containerisation at the assembly plant–rather than portside–offers further savings still, stresses Tim Leighton, global account manager for the Cars in Containers service of shipping line CMA CGM. “Vehicles leave the plant and arrive directly at distribution centres with no handling in between, whereas when transported by ro ro, cars are loaded and unloaded several times between the plant and the distribution centre, adding to costs,” he says. Finally, there’s been a transformation in the capacity effectiveness of containerisation, with providers offering greater cubic utilisation and improved loading.
Compared to traditional approaches, these rack and cassette-based systems can significantly reduce the number of containers required to ship a given number of vehicles. The result can lead to a lower cost-per-vehicle of the ocean leg compared to standard containers as well as the associated terminal handling changes. Typically, notes Leighton, such solutions reduce terminal handling charges up to half, quickly amortising the initial capital outlay involved. “If you’re shipping 20 cars in five containers, rather than ten, you’re not paying for five shipping charges, five unloading charges, and five bills of lading,” adds Paul Donaldson, managing director of Trans-Rak International. Roll it all together and a picture emerges of containerisation as a way of cost-effectively reaching emerging markets and secondary ports, bypassing the big ports and bulk-shipping requirements of the ro-ro fleets.
Container growth for smaller volume destinations
But questions remain over cost and practicality, as well as how containers dovetail with other automotive imperatives such as build-to-order and ‘final mile’ delivery to the dealer. For both the more expensive and lower-volume outliers of the market the attractions are obvious. Lotus, for instance, was an early convert to Trans Rak’s racking system. Chinese carmaker BYD, too, which has exported vehicles since 2006, relies on containerisation via CMA CGM to reach markets such as Africa, South America and the Middle East.
Premium carmaker Bentley Motors, too, makes uses of containers to reach particular markets in shipping from the UK. During 2009 the company shipped around 20% of its output by container, reports Veronica Hurst, Bentley’s distribution operations manager. Ro-ro typically costs less, and makes fewer demands on the carmaker’s distribution function, but containers holds out the prospect of flexibility, direct shipment to the dealer and potentially less damage. So while Bentleys moved by containers to several mainstream destinations–Australia, New Zealand, Japan, Saudi Arabia, South Africa, Canada and the US–they also were shipped to a long list of emerging markets: China, Brazil, Malaysia, Singapore, South Korea, Thailand, India, Kuwait. Owing to complex customs issues, container shipping to Taiwan is also now the default mode of shipment. Containerisation to certain markets–including China–level the shipping cost in comparison to ro-ro: although transport costs are higher, ‘backload’ availability means that Bentley is offered seafreight costs similar to ro-ro, according to Hurst. Containers also reduce another problem with shipments to emerging markets, especially when there is a lengthy inland leg on arrival.
Theft and damage literally go with the territory, especially when open carriage on car transporters is involved. “Containers offer security and protection,” says Kar-Tainer’s Cox. “On northbound shipments from South Africa, security is a big issue and in India, damage is a perennial problem. Containers keep vehicles out of sight, and away from damage.”
A more frequent service
Containers can also enable a more frequent shipping schedule than a ro-ro service might permit, especially in an economic downturn. “With customers increasingly requesting a justin- time delivery of customised cars, the frequency of sailings provided by a specialist car carrier may not be high enough to meet the demand, with two or three weeks elapsing between sailings,” says CMA CGM’s Leighton. “Containerisation can supplement a pre-established ro-ro service with smaller batches of cars shipped on a weekly basis.” Volvo Cars, for instance, uses containers to ship to small and emerging markets, according to spokesperson Stefan Elfström.
Even though container vessels make more port calls and are subject to delays, containers are a good option for markets where the frequency of service by ro-ro vessels is too low. To markets such as Malaysia, Thailand, India, the Philippines and Iceland, he adds, Volvo’s container volumes merit a contract with a transport company, whereas for lower volumes–Paraguay, for example, and several African countries–container space is bought on an ad hoc basis. Volvo Logistics–which handles vehicle shipments for thirdparties, as well–is also getting in on the containerisation act. Together with Cronos Containers, it agreed in February to ship vehicles to India.
Once there, the Cronos solution can either be lowered to a flat ‘empty-shipping’ configuration–and thus be returned to Volvo, seven racks to a container–or hopefully used to bring Indian-made vehicles back to Europe. Initially, Volvo’s own vehicles will comprise the outbound vehicle cargo, explains Cronos’ Scandinavia director Jan Hellström. Although no return-leg Indian vehicle cargo has yet been identified, discussions are at an early stage with both Cronos local staff and Volvo Logistics personnel as they pursue carmakers in India. Jaguar Land Rover is another enthusiast of containerisation as a way of shipping to emerging markets. Despite a preference for ro-ro–in part because of its large vehicles–container shipments are the regular route to no fewer than 17 markets.
Container loading times are longer than with ro-ro, explains Martin Slynn, vehicle distribution manager. But overriding any factors are end customer- and dealerspecified requirements for transport. And when these say ‘ship by container’–normal practice in several of the countries the firm’s vehicles find themselves shipped to–then containerisation becomes the default modus operandi. BMW, too, is a recent convert to the use of containers as a way of using secondary ports. Following recent trials with the Trans-Rak system, a contract with CMA CGM sees BMW vehicles loaded in Antwerp, and shipped to destinations in South and Central America, as well as the Caribbean.
Ro-ro vs container: the cost equation
While ro-ro vessels work out to be cheaper and more convenient for longer routes, India’s Tata Motors finds that containers come close to ro-ro costs in some markets, and can actually prove cheaper in others. For shipments to Sri Lanka, for instance–and on other short routes to emerging markets–containerisation is actually the preferred option, says Gunjan Choudhary, senior manager in the international business division at Tata. A container holding four light trucks might cost around $600 to ship to Sri Lanka, he explains.
But shipped by ro-ro, costs of around $200-250 per vehicle can be expected, meaning containerisation is the preferred option on such routes, yielding a saving of $50-100 per vehicle. But on longer routes, based on the same four vehicles to a container, transport to Africa costs approximately $3,000 per container. This compares adversely with a ro-ro cost of $700 per vehicle, yielding a total saving of $200 on a ro-ro shipment of four vehicles. But find a way of getting five vehicles in a container and the economics shift: containerisation offers a saving of $500 over the five-vehicle shipment. Tata is looking hard at ways of achieving just that, and trials are underway. “If we are able to get even one more vehicle in a container, containers would definitely be cheaper,” affirms Choudhary. “And if we could get five vehicles in a container instead of four, then we would go for containers rather than ro-ro.” While this might sound impossible, it is a potential in particular for the small, A-segment cars produced in India. Elsewhere with Tata, Kar-Tainer International’s cassette-based solution has already been demonstrated as a shipping option for the Nano.
But the approach has drawbacks. As volumes increase there will be stricter technology-led loading and unloading processes, meaning some of the current practices will not be acceptable. Once-common, jury-rigged restraint systems lashed together from wood and ropes, for instance, are rapidly falling out of favour even in China. “Ropes and wood just won’t hack it in the West,” says Trans-Rak’s Donaldson. “And port authorities are increasingly aware of the safety issues.” While some vendors claim a market preference for external loading, others point to limited evidence of an impact on damage. What is clear, though, is that carmakers can impose a stricter set of process controls in their plants and mainstream service providers than they can assume will necessarily be the case on unloading within an emerging market. At Bentley, for instance–which doesn’t use a racking or cassette-based containerisation solution, owing to the size of its vehicles–distribution personnel must strap cars down strictly in accordance with a manner specified by quality standards.
Bentley takes advantage of its own controlled processes to minimise the prospect of damage on arrival. “We load the cars in backwards, benefiting from the good controlled environment we operate in,” Hurst explains. “This, we hope, will make it easier for the people who have to unload the container at the final destination, and brings the least risk to the product.” Hurst points out that it’s this loading process that represents the extra workload containerisation places on the distribution function. She is, however, unimpressed with claims by advocates of containerisation that damage figures are materially lower: Bentley’s 2009 transit damage statistics, for instance, show only negligible differences between the risk of damage posed by ro-ro and containerisation solutions. That said, she points out, whether shipped by ro-ro or container, Bentley vehicles are dispatched with full body covers. “This may give us more confidence when shipping cars by ro-ro,” she says.
Moving vehicles in containers door to door
In the longer-term, while ro-ro will dominate the major shipping routes, containerisation should prove viable for a growing proportion of traffic to less mainstream destinations. In which case, stresses Trans-Rak’s Donaldson, the industry should focus on a bigger prize than simply viewing containerisation as a way of cost-effectively carrying out the ocean and portside compound legs of global trade routes. “The so-called ‘final mile’ is a big part of the benefit equation: reducing the amount of handling is very, very important,” he says. “Why can’t the industry put four vehicles in a container at the plant, and send that container direct to the dealer?
Containerisation to the dealer is more complicated than containerisation to the compound, but it’s a problem that logisticians should be able to solve.” CMA CGM’s Leighton agrees. “On a door-to-door basis, containers provide automakers with a significant economic advantage over the traditional intercontinental car transport chain,” he argues. “It makes providing a service to secondary ports easier, and responds better to the needs of automobile exporters in terms of shipping schedules and flow.” It’s not too difficult to envisage scenarios where doorto- door deliveries are viable. While build-to-order and full sequencing might be the purist’s approach, picking from compound at factory level presents fewer practical difficulties.
And given the probable volumes, that’s likely to be the most workable solution. In short, willingness to change–and willingness to exchange one form of complexity for another–are really the only barriers: door-to-door delivery by container must not only be offered, but requested.