Reducing the Cost of Safety Stock with Proactive Empty Container Repositioning

Reducing the Cost of Safety Stock with Proactive Empty Container Repositioning

2020 has brought new challenges for the container shipping sector. In addition to the existing trade imbalances, the COVID-19 pandemic has negatively affected the industry, creating a new port and travel restrictions for shipping firms to contend with. All of this decreases profitability and puts additional pressure on operations, forcing shipping companies to make tough decisions such as letting go of some of their employees or cutting down trade lanes. The situation is worsened by the issue of empty container repositioning — an industry-wide problem which is caused by the above-mentioned trade imbalances as well as long relocation time, high costs related to safety stock, and unreliable commercial forecasts, which are mainly based on the gut feeling of planners and local managers.

According to the Boston Consulting Group (BCG), one out of three containers is shipped empty, for a total of nearly 60 million empty container moves per year at an annual cost of $20 billion to the industry—up to 8% of a shipping line’s operating costs. Furthermore, there are extra costs associated with storing and maintaining these empty containers, meaning the total cost of empty logistics is estimated by Transmetrics to be more than 12% of operating costs.