Shipping and logistics: Diversified well beyond people's wildest dreams

To the man and woman in the street, 'shipping and logistics' connotes images comprising several cargo ships docked at a port and the towering cranes used to unload and stack containers. However, the industry is made up of organisations and companies offering a myriad ofservices, with involvement at various stages in the supply chain. The maritime transport sector, therefore, extends well beyond the carriers, shipping agents, port management companies, and regulators. Businesses providing services such as haulage, equipment rental, ship maintenance and repair, freight forwarding, warehousing, and logistics consultancy are also critical in the efficient transportation and delivery of goods.

The Korean-based Hanjin Shipping Company's motto, 'Beyond the Ocean', illustrates the growing significance of associated or allied services within the modern shipping industry. Hanjin is not merely one of the world's top 10 largest container carriers, but its diverse portfolio includes global terminal operations in locations including Japan, Spain, Belgium, and the United States; third-party logistics services including inventory management and warehousing; and a shipyard that has repaired and converted more than 150 vessels since its establishment in 2009.

economic hardship

Jamaica's maritime transport industry is also supported by local companies providing these associated or allied services to local shippers and major international lines. These services include haulage, reefer services, equipment hireage and lease, stevedoring, maintenance, ship bunkering or refuelling, and dry-docking. Managing director of Allied Trucking and Maritime Services (ATMS), Alva Wood, notes that there has been some downturn in this transportation subsector since ATMS' establishment in January 2005. He suggests that after 2008, the decline in volume and demand has been a by-product of the failure of several alternative investment schemes, economic speculation, and the continued devaluation of the Jamaican dollar. Companies used to do well in businesses associated with shipping, but many have now gone out of the industry due to economic hardship, he opines.

In light of the expansion of the Panama Canal and Jamaica's proposed development as a logistics hub in the Americas, Wood, a shipping industry veteran having previously been general manager of Port Services Limited, notes that major shipping lines coming from the Far East currently offload their cargo that is destined for the US Eastern Seaboard cities in ports located on the US West Coast. There is, therefore, a reliance on rail and other ground transportation or 'land-bridge' solutions in moving goods cross-country to the major population centres on the US East Coast.

Wood is optimistic that both international shipping lines and their shippers will look towards all-water passage - movement of goods by sea routes - once the Canal opens in 2015. This would strategically position Jamaica to see opportunities for increased trans-shipment business through our ports and to take advantage of our strategic location by attracting investors to develop the proposed logistics hub. Such development would improve the prospects for business in the shipping industry. However, he has reservations that before any plans are laid to expand ATMS' capacity in providing private stevedoring and haulage services and invest in new machinery such as cranes, low-boys and earth-moving equipment, he will have to "see what is to come". He cites plans for the privatisation and expansion of the Kingston Container Terminal and the policy guidelines to be established for the common economic zones (CEZs) as critical to facilitating the opportunities for businesses. He opines that "if more people will be working, more services will be offered and as such, increases the need for people like us".

internationally rated

However, the requirements of Jamaica's ever-evolving maritime sector extend beyond equipment, maintenance, and haulage. The country's strategic position along several international shipping lanes, internationally rated water quality, and robust cruise business has created demand for other value-added services over the years. As such, businesses, including local shipping agents, have enhanced their core functions to include allied services as an integral part of their product offering, effectively meeting the growing demands of select international clients and shipping lines, as well as providing new streams of revenue.

The foresight of Lannaman and Morris (Shipping) Limited chairman and CEO Harriat 'Harry' Maragh has led to the diversification of the company's operations over the years to include services such as warehousing and logistics. The company, which represents international lines such as Evergreen, Carnival Cruise Lines, and which Norwegian Cruise Lines, and which provides full-scale on-the-ground support to the majority of international military vessels which visit Jamaica adopted a value-added approach to its cargo business well before logistics became a buzz word in Jamaica and strategically expanded its business in several directions.

Lannaman and Morris' early acquisition of a significant amount of warehouse space at Newport West has developed its capacity to add value to incoming cargo with the stripping of containers for trans-shipment to nearby Caribbean islands and territories. The company also manages the Ocho Rios Cruise Ship Terminal, one of the Caribbean's top cruise ports, on behalf of the Port Authority of Jamaica.

In describing his motivation to diversify the company, which celebrated its 40th anniversary this year, Maragh stated: "In the days when there was more domestic cargo, we would earn our living from commissions on the containers- boxes - for import and export. The rates were not high, but with the volume, we were definitely okay. When the economy declined and volume was less, everyone was left fighting for the same shrinking business."

He recalled that when he entered the shipping industry 40 years ago, there were at least 15 large shipping agents in Jamaica and today, there are just about five distinct, viable companies. "In the agency business, you can't survive unless you diversify. Our survival has been based on the fact that we have diversified well beyond people's wildest dreams."

Ship chandlery, the supply of food for crews and passengers, maintenance and cleaning supplies and other items required for the ships' stores, is also considered a relatively lucrative subsector of the shipping and logistics industry. Ship chandlers' year-round operations are directly linked to the requirements of and requests from arriving and departing vessels, and resourcefulness and speediness are critical components of service delivery. In exploring areas associated with Jamaica's logistics development, ship chandlery may be viewed as an area of possible investment in the allied service to meet the expected demand arising from increased arrival of vessels.

high level of production

Gateway Shipping's Loxley Tulloch states that local shipping agents have tended to the needs of their clientele by taking on various allied services, particularly in support of cruise business as "containers don't talk back, but people curse". However, he cautions that a consistently high level of production at an internationally competitive rate is required to support this type of business. He notes that Jamaica does not have the "depth" in its productive capacity to supply cruise ships carrying in excess of 6,000 passengers and crew with produce on a weekly basis, for example. As such, cargo ships are most likely to purchase local supplies for their stores, while cruise lines often import their own supplies. The role of local agents is essentially then limited to clearance and delivery of the goods.

Tulloch intimates that Jamaica's shipping industry, and allied services in particular, will see a significant boost if local conditions facilitate greater 'home-porting', becoming the port at which vessels are based and are re-stocked, cleaned, and bunkered prior to departing on each journey. When asked to what extent he believed Jamaica's planned emergence as the fourth node in the global supply chain would stimulate economic recovery and business development, Tulloch was decisive, "Everything is predicated on critical mass. So the volume will determine how far any company will go and it is the logistics hub that we think will warrant that level of investment."