What is transshipment?
Understanding the Supply Chain Challenge
Transshipment is a complex supply chain challenge that involves the transportation of cargo or a container from one vessel to another, while in transit to its final port of discharge (POD). Transshipping commonly happens when the cargo can’t reach its final destination through a direct route.
A classic transshipment scenario occurs when the cargo or container leaves the original port of loading (POL) on vessel A, travels to a transshipment port, is discharged from vessel A, and is loaded onto vessel B, which transports it to the port of destination (POD). While this is a simple example, there are more complex cases involving multiple ports or transfers before the cargo reaches its final destination.
While often a necessity in maritime shipping, transshipments can cause delays in delivery or damage to the cargo, which may impact the supply chain efficiency. But, in spite of these risks, transshipping is an integral part of the global trade network.
Transshipment operations can be challenging due to various reasons. One of the primary issues is the potential for cargo damage during transfer. Cargo handling equipment and procedures must be carefully managed to minimize the risk of damage. Additionally, transshipment operations can be delayed due to weather conditions, port congestion, or unexpected events, which can result in increased costs and potential supply chain disruptions. Finally, some ports may have regulatory or security requirements that can make transshipment operations more challenging.
What is the Purpose of Transshipment?
According to a report published by the United Nations Conference on Trade and Development (UNCTAD), “over 80% of the volume of international trade in goods is carried by sea.” This translates into more than 5,000 container ships transporting more than 34 million containers annually. Many of these ships don’t have the capabilities or availability for end-to-end shipments, which is one of the primary reasons for transshipments. Some other leading reasons are:
- Challenges with large vessels: not all ports can accommodate large vessels, which can make transshipment necessary. When containers are shipped in a large craft, they may need to be transferred to a smaller vessel to reach their intended destination. Transshipment allows for the efficient transfer of cargo from large vessels to smaller ones, ensuring that goods reach their final destination in a timely and cost-effective manner.
- No direct route: depending on the final destination, a shipment may be required to be shipped by two modes of transport. For instance, a shipment may be transported by road from point A to B and via sea from point B to C. Transshipment facilitates the transfer of goods from one mode of transport to another, ensuring that the cargo reaches its final destination.
- Reduced costs: direct shipping from one point to another is often costly, irrespective of the port. Transshipment may take longer, but it ensures that transportation costs are minimized, making it more cost-effective.
- International politics: in some cases, transshipment can also be used to bypass trade restrictions or bans between countries. When exporters and importers want to trade goods despite the restrictions, they may choose to ship via a third country. Transshipment can facilitate such trade transactions by providing an alternative route for goods to reach their final destination.
One of the major causes of transshipping delays is port congestion. However, despite the potential risks, transshipment remains a necessity for most major economies. To accommodate this need, certain ports in Europe have become transshipment hubs, with at least 25% of containers passing through their terminals being part of a transshipping voyage.
Southern European ports – such as Valencia in Spain, Gioia Tauro in Italy, and Algeciras Bay in Gibraltar – have even higher transshipment volumes, with as many as 75% of their yearly container outage being part of a transshipment. However, the five busiest ports in the world are in Asia:
All of these transshipment ports play a vital role in the global trade network, enabling businesses to move cargo more efficiently and effectively.
Transshipments are a critical aspect of the shipping industry, but they can cause delays and other challenges during transshipments. These delays can occur for a variety of reasons, such as late arrivals, ineffective terminal services, or delays at the point of departure. These delays can lead to lower asset turnover and dissatisfied customers, both of which can negatively impact a business.
It’s important to track the transshipment, so you can keep your customers updated to any delays. One way to track transshipments is to visit the carrier’s website and enter the Bill of Lading (BoL) number. This process can be time-consuming and it does not allow the storage of container information on the website. A more efficient way to track transshipments is by advanced AI technology. You can receive automated and real-time updates on container movements, enabling businesses to monitor their cargo’s movement efficiently.
The primary benefits of an AI solution are:
- Automated tracking: easily access the details of the entire route, including transshipments, by tracking through booking reference, BoL number, or container number.
- Real-time updates: stay updated on all container movements with extensive mapping and geofencing alerts on all container berthing terminals.
- Cost savings: by efficiently tracking transshipments, businesses can minimize the impact of delays and reduce asset turnover, resulting in cost savings.
- Improved customer communication: businesses can inform their customers of delays in advance, building trust and understanding with their clients.