The New York Shipping Exchange (NYSHEX), due to be piloted in January 2016, aims to overcome the chronic inefficiencies that afflict ocean transportation and add cost to global supply chains.
At MIT’s Center for Logistics (CTL) Supply Chain Innovation Summit 2015, Gordon Downes, founder and CEO of NYSHEX, explained the rationale behind the new market. He said, as reported by Ken Cottrill of MIT’s CTL, that container shipping changed in 2008 when the anti-trust immunity that groups of shipping lines enjoyed came to an end. As a result of that, extreme freight rate volatility has been a feature of the container trades.
Here a few related problems that have undermined the industry’s performance over the last seven years.
- Unenforceable contracts -- Most ocean contracts cannot be enforced and carriers are at liberty to impose rate increases and roll bookings as needed.
- Unpredictable cargo -- Shippers have a tendency to overbook and cancel bookings, and not show up at designated loading times.
- Deteriorating service levels -- The performance of ocean transportation has declined in a number of areas. Downes cited a 10% increase in ocean transit times, a drop in schedule reliability of 8%, blanked sailings increasing by 9%, and a 24% increase in the number of cargo no-shows.
It is estimated that $79 billion worth of economic damage has resulted from the industry’s service problems since 2008, he said. NYSHEX is an alternative to the unpredictable spot market for ocean transportation.
Read more how NYSHEX will work at MIT’s Center for Transportation and Logistics.