- July 15, 2022
- Posted by: Solverminds
- Category: Innovation


The Current Situation
The past two years have been the most tumultuous for the shipping industry. The ongoing pandemic and the war in Ukraine have dealt the shipping industry a significant blow, with the situation being made worse by indiscriminate lockdowns in China, the world’s premier manufacturing hub.
In April, Shanghai City, home to the world’s largest port, went into a lockdown. Estimated to move 250,000 containers in a day, the closure of Shanghai Port meant an overnight supply chain crisis. The trucking and warehouse capacities declined in a matter of days owing to strict quarantine measures imposed by Beijing for people moving in and out of Shanghai City.
It became so severe that some shipping lines started to omit calls to Shanghai in the second week of April.
Due to the extended Covid-19 Shanghai lockdown, there has been a build-up in backlogs of containers for export at the port terminals. In fact, Drewry, a leading maritime research consultancy firm, estimates that up to 260,000 TEU of export cargo was not shipped from Shanghai in April alone. This is the equivalent of twenty-six fully loaded 10,000 TEU container ships amidst Liner shipping capacity shortages.
These frequent Covid lockdowns in China’s manufacturing and logistics hubs have left shippers facing an immense crisis. Also, at the same time, intermodal restrictions and a surge in demand for goods are among other factors that led to the unavailability of containers along critical trade routes. As a result, freight rates have soared significantly.
Peak Season Coincides with the Suspension of Shanghai’s Lockdown
However, after an eight-week Shanghai City lockdown, in mid-May, China announced the resumption of manufacturing and shipping in the city. This coincided with shipping’s mid-year peak season as retailers in the EU and US build inventories for the end of summer and the approaching holiday season sales.
“We expect that this year’s summer peak season cargo surge will be even more chaotic for global supply chains than the 2021 peak shipping season,” forecasts the xChange Industry Pulse Survey, which sampled views of 200 individuals from across the container logistics industry.
This will be exacerbated by ports’ congestion following strict quarantine measures for port workers. Consequently, ocean carriers are grappling with severe container shortages. Additionally, essential ports like Los Angeles and Long Beach want to introduce fines for containers that are overstaying.
“Ocean carriers will be charged $100 per container, increasing in $100 increments per container per day. The new rules will go into effect November 1st,” read a statement from the Twin Ports.
This is symptomatic of the complexity involved in delivering containers to the consignees and returning the empty ones for packing at suitable locations.
Container Imbalance
Instructively, in a world dominated by e-commerce, speed and efficiency are paramount in the shipping business. We are in an era of “just-in-time” logistics where, once you order an item, you want it delivered in less than a week. Unfortunately, the pressure to satisfy this ambition is borne by container shipping.
As manufacturing and demand resumed last year, the recovery was quicker in China than in North America and Europe. Consequently, the uneven recovery prompted a container imbalance along the popular transpacific and transatlantic routes. This has caused Chinese ports to continue to face container shortages while North American and European ports are flooded with empty ones.
It is interesting to note, however, that container shortages started back before the pandemic. In 2020, the US imported goods worth $434.7 billion from China and exported only $124.5 billion in the opposite direction. Based on this, Sea-Intelligence, a Supply Chains Research Firm, estimated that the container imbalance between China and North America was around 45%.
The pandemic has worsened the imbalance, with recent estimates closer to 55%.
Can these global container imbalances be viewed as an opportunity in the highly competitive maritime industry?
The answer is yes. Ocean liners that apply innovative solutions like Solverminds’ Optimizers to solve the current and intense global container imbalance problem will have a cutting edge in the shipping supply chain market. “In addition to this, these ocean liners will also be able to reduce their repositioning costs,” says Anthony Damian, Managing Director of Solverminds.

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Mitigating container imbalance by using smarter solutions
Currently, the need for empty container repositioning is significant as many containers are still in the wrong places and unable to leave. This results in Liner companies being required to allocate significant budgets to move these containers to routes where they are needed.

Every year, repositioning empty containers costs the shipping industry approximately $20 billion. This is almost 10% of the operational costs.
Additionally, the pandemic has widened trade deficits among countries. For instance, the value of goods exports in OECD (Organization for Economic Co-operation and Development) countries dropped by 8.2% at the height of the pandemic in 2020.
Although China’s production capacity was hit as well, it rebounded far faster than other regions.
Thus, substantial trade imbalances persist, creating significant supply chain pressures along critical trade routes. To compensate for this scenario, container carriers have been forced to impose a relatively lesser-known surcharge called EIS (Equipment Imbalance Surcharge) or REPO (Repositioning Charge).
The goal of shipping liners now is to recover repositioning costs and return containers to their origin, so they are available again for exports. With surcharges adding additional costs to freight rates, it is often marginally more expensive for customers to use carriers without the capacity to manage empty container repositioning.
Is there Hope to Manage the Current Container Imbalances along Critical Trade Routes?
The automation of container management is rapidly emerging as the most cost-effective and cutting-edge approach.
The advantage of digital processes like these is that they are data-driven and can be leveraged to forecast downstream logistical challenges. Shipping lines can work with technology solution providers to effectively manage container repositioning. This includes moving empty containers from an area of surplus to a location with a deficit. One such solution is OPTIBOX, which comprises a range of cutting-edge qualities based on data analytics and predictive optimization.
OPTIBOX is a tailor-made empty repositioning solution by Solverminds, a liner-shipping technology provider company with offices at key global maritime hubs.
OPTIBOX uses optimization engines to identify global container imbalances and plans for repositioning with minimal costs and transit times.
The automation of container management is rapidly emerging as the most cost-effective and cutting-edge approach.
The advantage of digital processes like these is that they are data-driven and can be leveraged to forecast downstream logistical challenges. Shipping lines can work with technology solution providers to effectively manage container repositioning. This includes moving empty containers from an area of surplus to a location with a deficit. One such solution is OPTIBOX, which comprises a range of cutting-edge qualities based on data analytics and predictive optimization.
OPTIBOX is a tailor-made empty repositioning solution by Solverminds, a liner-shipping technology provider company with offices at key global maritime hubs.
OPTIBOX uses optimization engines to identify global container imbalances and plans for repositioning with minimal costs and transit times.

Some of the features include: supply chains forecast capabilities generated using time series models, automatic route generation for all port pairs, real-time container tracking, and tracing, among others. In addition, OPTIBOX comes embedded with Solverminds’ AI platform, SEDGE.
The AI performs tasks such as data cleansing, data munging, data exploration, statistical analysis, and predictive analytics. The end goal is to provide a real-time global view of container imbalances and generate the most cost-effective repositioning plans. This is all made possible through a “Cost Matrix Calculator” feature, which estimates repositioning costs in advance for budgeting and advice on better cost control. It also analyzes variances and takes effective and proactive decisions for future repositioning plans.
The goal for shipping lines is to recover repositioning costs and return containers to the origin so that they are available for exports.
Another benefit for OPTIBOX is to help a shipping line gain in-house control over repositioning costs, which is usually a task contracted to third parties at an exorbitant price. Container idle time is also reduced, which, in turn, minimizes storage costs due to reduced turnaround time.

Future-Proofing Container Shipping with Smart Solutions
With ever-increasing supply chain disruptions, it is not a question of ‘if’ another crisis will occur but, instead, ‘when’.
These upheavals are heralding a new era of supply chain management, and service automation will take centre stage.
Herein lies an opportunity for shipping lines to consider staying ahead of the curve. The use of data analytics and predictive optimization is taking over container management. Further, with these models now embedded with artificial intelligence (AI) and machine learning (ML), the container planning ecosystem is about to get innovative.
For example, a solution like OPTIBOX has a “what-if” simulation function, allowing users to model different container repositioning scenarios and the expected financial impact for each. This happens by optimizing historical data and market conditions for the most accurate and efficient output.
With an optimizer like this, the operations team can focus on more productive tasks and delegate container planning to OPTIBOX. Under this arrangement, storage, depot services, container repair, and maintenance costs are significantly reduced.
Investments in smart solutions are steadily playing the role of future-proofing ocean carriers’ business models and, by extension, their balance sheets. Delays may have tremendous risks, such as loss of market share or even getting an ocean carrier edged out of the market.
Overall, a shipping line using OPTIBOX can quickly eliminate REPO surcharges, maintain a client-friendly freight rates baseline and is a valuable tool for shipping lines to implement customer-centric strategies. These will help minimize empty repositioning costs and also assist in reducing the turnaround time of the global container inventory.
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