Old hat with airlines, now Maersk and Hapag-Lloyd introduce hub-and-spoke to shipping
 The hub-and-spoke method of moving goods and people has long been an airline practice, and is now being re-designed for ocean carriers.
What it amounts to is having a plane or a ship go to a single destination and come back directly, rather than landing here and there picking up cargo and unloading at various ports at the destination.
In his article in New York's Forbes magazine, Willy Shih, who teaches at Harvard Business School, does not deal with how one secures the cargo to justify the here-and-back again method, but he covers a lot of interesting ground nonetheless.
The reason this interest has been resurrected today, is the need for schedule reliability, which has been a traditional focus at Maersk. Now united with Germany's Hapag-Lloyd in a new alliance called Gemini Cooperation, they have re-designed the hub-and-spoke method with a view to apply it to ocean shipping.
Carriers have long endured flaws in the old rotation method where a ship typically loads cargo at three or four Asian ports then goes to America or Europe to unload at three or four other ports, which undermines any chance of on-time arrivals. Thus, ships miss scheduled berthing windows, causing costly delays.
For example, CMA CGM’s French Asia Line 2 starts in Tianjin, makes four more stops in China before reaching Singapore. It continues to Rotterdam, Hamburg, and Antwerp in Northern Europe before heading back.
All this - plus a raft of angry shippers and forwarders - can be avoided if the ship simply goes to one port and returns to another on time adding to a welcome predictability to life at sea.
Writes Mr Shih: "There are a lot of sceptics who wonder how this is going to work, because the plan counts on having efficient hubs where containers can be transshipped just as one would make connections at an airline hub.
"There are key operational benefits to this strategy, and if Maersk and Hapag-Lloyd can make it work it could cause others to switch," he said.
With the current low schedule reliability and the continuing risk of new disruptions such as in the Red Sea, decoupling legs could make a lot of sense.
At the beginning of the Red Sea re-routings, Europe-bound cargo that was meant to be unloaded in the Mediterranean was in the wrong load sequence for unloading.
The shift to transshipment on these routes was already a de facto hub and spoke operation. As Maersk has pointed out, the hub-and-spoke model affords more flexibility for changing routings.
If one is dealing with increasing volumes of transshipment cargo, as one often does as supply chains change, one must adapt to new circumstances, become more sophisticated and complex. This makes being on time a factor of critical importance.
Missing a berthing window in Antwerp means one is shunted aside until all the on-time arrivals are serviced and depart.
Efficient transshipment will be key, says Mr Shih. Some ports are already good at this. It's the big concern among shippers with their dependence on efficient transshipment at major hubs that will have to be able to unload, sort, and reload boxes efficiently.
"Some Asian ports like Singapore are already very good at handling transshipments, and others that Maersk control like the Port of Tanjung Pelepas in Malaysia are also very good.
This might also be less of a problem for destination ports. "During a recent visit to Maersk’s APM Terminals operation at Rotterdam Maasvlatke, we saw a highly automated and efficient operation that already supports extensive transshipments destined for the hinterland.
"The key is having sufficient yard capacity so that with the increase in container movements there is sufficient space for buffering and sorting without excessive stacking and resorting. The Maasvlatke operation uses sophisticated automation and computerised management tools, and is in the midst of a major expansion," writes Mr Shih.
"Unlike passengers at an airline hub, ocean cargo can generally wait for a few days to change ships. If boxes can then be routed on an outbound long-haul leg that runs more predictably, Maersk and Hapag-Lloyd could have the opportunity to raise the bar on schedule reliability. That would probably force other carriers to consider it as well.
"One container line executive told me that initially they were sceptical, but now they are starting to think about it more seriously. This could be the beginning of a significant shift in how containerised ocean cargo is moved," said Mr Shih.
It may be that the Just-in-Time fetish of yesteryear has shifted from the retailer to the ocean carrier. These days, large scale distribution centres, once known as the Four Corners in America, and are represented by much the same thing in Europe serving the consumer-rich "Blue Banana" prosperity zone.
This, of course, means constantly feeding these vast "fulfilment centres" with a complete range of products. These do not require Just-in-Time treatment because they are already there at the retailers beck and call.
The problem arises with seasonal consumer buying sprees, when one commodity is wanted in large quantities for a short period, but not after when yesterday's asset becomes today's - and tomorrow's - liability.
That can be caused by a work stoppage in Ningbo, trouble with the crane or a crane operator, that delays loading. Then a transshipment cargo from Jakarta fails to arrive on time at Singapore and one must wait a day or two for it to arrive and then have the port find time to load it.
So our fictional 10,000-TEUer misses its berthing window in Antwerp and will never make Hamburg on time. And in the five-day delay, taking everything into account, container loads of colourfully packaged sweets for Valentine's Day will all go to waste. Other losses will not be as dramatic, but will still cause unrecoverable financial loss.
Like many initiatives in ocean shipping, hub-and-spoke may not work out. But if successful, it will undoubtedly be a game-changer for seaports. The hub-and-spoke idea may also solve a serious problem and should be thoroughly tested. |
