Guest Editorials

Guest Editorial: Why Is Container-On-Barge So Slow In Getting Started?

By Masao Nishi

Principal, M. Nishi Strategic Advisory

St. Louis, Mo.

Putting containers on barges has been talked about for many years but with minimal traction. I want to offer my thoughts on what the key issues are and what needs to happen to get things moving. For this article, I am focused on the ocean containers that originate in Asia and are destined for the U.S. Midwest market.

For background, I refer you to my article that was published in the November 2021 issue of Supply Chain Management Review and then again in the February 2022 Logistics Management. It is titled “River Runs Through It: Is An Inland Waterway In Our Future?” It’s about an alternative way of getting ocean containers into the U.S. Midwest. The concept involves moving ocean containers up the Mississippi River and establishing a container port in the Midwest, for the Midwest.

It’s All About The Shippers

We must remember and focus on the idea that this is all about the shippers that move containerized freight globally. They are the retailers, distributors and manufacturers. The typical products they move from Asia to the Midwest are consumer packaged goods and durable goods for retailers and distributors; and components, sub-assemblies and finished goods for manufacturers.

These shippers are generally interested in and supportive of this alternative idea because of the potential cost savings, sustainability benefits and improved risk management. But at present they have nothing to sign up for, just ideas. We need to have a defined end-to-end service to move containers from a point in Asia to a point in the U.S. Midwest, that they can book. 

Leadership Is Critical

For something to happen, someone must take the lead on the entire solution, not one piece of it. There is a lot involved, and many players play important and necessary roles, but someone must take the lead overall. In my view, the best candidates for providing the leadership are the barge companies that are already operating on the Mississippi River. They are the ones who have the most to gain. They have the operational expertise as well as the barges and towboats. And since their traditional businesses have dramatically changed, a new adjacent business should certainly be welcome. If they do not take hold of this, a new entrant from outside the industry can surface. I would like to offer a few specifics that I think are particularly important for container-on-barge to move forward in a significant way.

Create A New Business

Here is one of the biggest problems: barge companies and the shippers do not cross paths. They do not know each other, much less do business with each other. The reality is that in the past there has been no reason why these two groups would interact.

To make progress, obviously this issue must be fixed. Although we are talking about the river, barges and towboats, what we are really talking about is very different from the historic barge business. That is because the customers are completely different. At this point of trying to get containers on barges, it is much more important to be aligned with the customers.

The expertise to operationally run the barge business already exists. It would be appropriate for barge companies to set up separate business entities devoted to the container business. A serious commitment is needed. It should be allowed as much autonomy as possible and report to the very senior levels of the barge business. Hire supply chain executives from retailers, distributors and/or manufacturers who know their industry and their issues and priorities and know the people and key decision makers. And they must be absolutely focused on creating the best solutions possible for the shippers and creating and building this new business.

End-To-End Offering

This new entity must create the end-to-end product that they can sell—an all-water service from an origin in Asia to a destination in the U.S. Midwest that shippers can easily book. There are many pieces involved but none more important than the ocean carriers. By necessity, they are the biggest piece of this new end-to-end service.

A partnership needs to be created with ocean carriers to work out the issues around empty containers, return locations and free days and assure that a seamless end-to-end service is developed and maintained. Close workings are also needed with freight forwarders and 3PLs who will work on behalf of shippers to execute this new alternative. And there are many other important partners, including the ports, drayage companies, developers and economic development groups. Not only leadership but resources will be needed to pull this together.

The other entities that can provide the leadership and create the end-to-end solution are the ocean carriers. But so far, they have not indicated this as a priority. The relative potential benefits are greater for barge companies, and the ocean carriers may not at present wish to pursue discretionary strategic initiatives. Even if ocean carriers ultimately drive this business, it may take the barge companies to get things started. And in any event the barge companies will benefit if the idea comes to fruition.