The recent increase in Trans-Pacific container volume has led ocean carriers to step up their efforts to secure backhaul cargoes to avoid the cost of repositioning empty boxes from U.S. inland locations.
Historically, the U.S. trade imbalance between imports and exports means about 75% of the loaded containers that reach domestic ports return empty. Repositioning those empty containers to their origin point (often in Asia or EMEA) costs the industry up to $20 billion each year, or up to 8% of operating costs for a carrier. And that is just the ocean side.
When international containers arrive, the cargo is often transloaded into domestic containers or dry vans for inland transportation. This then frees up the ocean container to be used for an international export load more quickly as it is closer to the port. However, a substantial portion of these ISO ocean containers are moved inland via truck or intermodal rail to the import shipper’s location. Repositioning these empty containers back to an ocean port is costly for the ocean carriers.
To offset repositioning expenses, the ocean carriers offer financial incentives to their intermodal partners such as Matson Logistics to use the smaller international containers rather than larger domestic dry vans or 53-foot intermodal containers.
What is a small box or container? It’s basically an ISO ocean container with sizes of 20’, 40’ or 45’ in length.
In this blog, we explore the strategic advantages of using smaller shipping containers, showcasing how — in certain situations —they bring cost savings and flexibility to your supply chain.
By using small box containers, shippers can take advantage of dynamics in the container market for a wide range of benefits.
Here’s an example of how it works. An ocean carrier moves a loaded container from Asia to a West Coast port, with a final destination in Dallas. When the container is emptied at the destination, it must be returned to Asia for the next load. Repositioning an empty container from an inland point to a port can be expensive for the ocean carrier, not to mention a logistical headache.
To speed the return, ocean carriers offer the container's use to 3PLs, such as Matson Logistics, to fill the container with domestic freight routed for a port city on the East, West, or Gulf coast. Once the container arrives at its West Coast destination and is unloaded, the 3PL handles the return to the ocean carrier’s terminal or depot.
3PLs effectively utilize the container's capacity as it moves primarily by rail from an inland location usually to a West Coast port, but sometimes to an East Coast or Gulf port. This collaborative approach optimizes container utilization and streamlines the logistics process, reducing costs for all parties.
These small box opportunities are best suited for domestic intermodal shippers who tend to transport relatively heavy and dense cargo, i.e., any cargo that weighs out before it cubes out. In these instances, a shipment cannot use all of the cubic space in a container because if it did, the container would be overweight and thus not road legal.
Examples of cargo that would be well-suited for small box containers include beverages, canned goods, bagged foodstuffs, paint, lumber, paper products, machine parts, metal/steel, etc.
For example, a 53' trailer can hold up to 26 pallets. But with a load of heavier product such as canned goods, it can only carry 18 pallets to meet the legal weight limit. Although there is empty space, loading more pallets would put the trailer over the weight limit. The shipper is paying for space it can't utilize. A 40' container is sized for 20-22 pallets and can handle the weight limit. The shipper can save a significant amount of cost per load. (Keep in mind that a 53-foot dry van can have a lower load limit than a 40-foot international container due to the additional steel used in construction.)
Examples of cargo that usually need all available cubic space (sometimes known as “high cube freight”) would be many lightweight but bulky consumer goods, such as furniture, electronics, bedding, appliances, etc. For these cargoes that take up two 53' trailers, it would take three 40' containers to have the same cubic volume. In this scenario, sticking with the 53' trailer or intermodal container option makes more sense.
Key benefits of switching to smaller shipping containers for intermodal shipping include:
The primary advantage of shipping in an international container vs. a 53' domestic trailer is reduced transportation rates. Ocean carriers typically offer financial incentives to their 3PL partners, who pass lower rates on to the shippers.
These transportation cost savings can range from $200 to $500+ per container, depending on market conditions and lanes.
Other advantages arise from reduced labor costs associated with loading, blocking, and bracing cargo. Let's delve into more detail on these cost-saving aspects.
For some shippers, the small box containers are easier to maneuver and handle in congested or tight spaces, such as warehouses, storage yards, and distribution centers.
Smaller containers may comply with specific regulations or restrictions imposed (such as length) by certain jurisdictions or transportation authorities.
Smaller containers can be easily adapted with product-specific dunnage, blocking, and bracing to accommodate specialized cargo needs. This volume advantage reduces the need for more extensive blocking and bracing to transport the cargo safely.
You cannot always rely on a consistent cargo volume to fill each container. While the 53' trailers may appear enticing, they can fail to align perfectly with your cargo's dimensions for a particular shipment. This is where the concept of conversion comes into play: transforming select 53' trailer loads into small box shipments.
This strategic move unlocks not just immediate but long-term cost savings. Converting 53' trailer loads into smaller containers makes it less costly to customize the box volume according to your specific cargo needs. This adaptability empowers businesses with varying shipping requirements to pay only for the space they need where and when they need it.
Smaller containers cater to an array of cargo sizes and types, enabling precise and efficient loading. This adaptability minimizes the risk of wasted space and cargo damage, safeguarding both your cargo and your bottom line. For example, a 40’ container offers roughly double the load capacity of a 20’ box but the rate is typically only 20-30% more.
Recently, Matson Logistics partnered with a prominent paint manufacturer that underwent a significant logistics overhaul by relocating its operations from Illinois to Washington. In pursuit of optimal efficiency and cost savings, it transitioned from shipping in 53' trailers to 40’ containers, avoiding extra costs for unused capacity with products that "weigh out" a trailer. At the same time, it can secure capacity from the under-utilized 40' fleet rather than the 53’ fleet, which can have inconsistent availability in some lanes.
At Matson Logistics, we're more than just a logistics provider; we're your partner in optimizing your supply chain for success.
Matson Logistics specializes in delivering tailored services that empower our clients to harness the advantages of smaller shipping containers in intermodal shipping. Here's a closer look at how we help businesses navigate the logistics landscape:
Our expertise lies in strategically deploying 20’,40’, and 45’ containers, particularly in scenarios where they are destined for port locations or specialized export destinations. These containers are especially valuable for West Coast shipments, offering our clients a cost-effective and versatile solution.
We recognize the potential of niche lanes and ports where larger containers might not be the most efficient choice. Matson Logistics identifies these opportunities and tailors solutions accordingly.
One common challenge in logistics is cargo imbalances in specific hubs or cities.
For instance, in cases where goods are imported from Asia into inland cities like Columbus, Memphis, or Dallas, there is often a dearth of outbound export cargo. This imbalance can leave containers stranded and accruing daily detention fees for the ocean carrier.
Matson Logistics steps in with our Repo Progam We secure access to the containers than need to migrate back to a coast port, and then offer it our customers at a savings over a traditional dry van move. The result is a win-win-win scenario – clients avoid unnecessary costs, carriers reposition equipment, and we serve our customers better while helping improve equipment flow.
The Repo Program helps shippers achieve cost savings, flexibility, and operational efficiency. We're here to answer your questions, provide expert guidance, and tailor solutions to grow your business. Contact us today or request a quote to get started.