The Vermeer Corporation, headquartered in Pella, Iowa, is a manufacturer of industrial and agricultural equipment. The privately held company distributes products globally from seven production facilities and offices in Pella, Iowa, the United States and multiple locations worldwide. We asked Vermeer’s Transportation and Logistics Manager, Jason Braithwaite, how the company balances its use of air versus ocean freight to reach its far-flung customers around the globe.
When do you use air versus ocean shipping and why?
The easy answer for our inbound freight is solely based on necessity. When do we need the part, and how critical is it for us to have it in a timely manner? Our procurement teams work closely with our compliance and logistics team to coordinate this.
There have been times in the past few years when we had to fly parts in from overseas, even when a container full of the very same product was stuck in a container yard or on the rail already in the US. Those days are behind us for now, but the reality was that we had to spend the money on air freight to keep our lines going with critical parts.
On the outbound side, our dealers and entities around the world decide on how their parts and finished goods are to be shipped. During the pandemic, we had a high amount of freight moved via air freight, and that came with a cost. We are fortunate that we have excellent trade partners and agreements in place that allowed us to mitigate the cost and many times the risk for our dealers.
In our business, size dictates a lot which mode of transit we will choose. 99.9% of the time our finished are traveling via ocean freight. Parts follow the same logic, however we have and will ship large parts and even machines via air freight if the urgency exists.
What are some of the pitfalls of each?
The pitfall of ocean shipping is transit time. It simply takes longer inland, on the water, and at the destination. Things have improved for a majority of the areas we serve, but being in the middle of Iowa, we are 4-5 hours from all the major rail ports so that we lose 1-2 days right out the gate when we go via ocean. Our dealers have learned to be flexible and factor this extra time into their ETA of their order.
Cost is the major pitfall for air shipping. We were fortunate to have negotiated and secured many very solid small parcel contracts that saved us during the pandemic, but with the loss of so much of the air freight consolidation market, what was available was higher priced resulting in pockets of our dealer network having to spend much more money just to keep parts on their shelves.
When shipping equipment, do you determine your preferred mode of shipping, or do you leave it to your freight forwarders?
We work very closely with our forwarders and brokers. Our dealers on the outbound side of business make the decision on air vs. ocean and many times decide which carriers they prefer to use. We have wonderful partners with good quoting tools, which provides us the opportunity to present the information to the dealer quickly and efficiently. Once the chosen method of transit is selected, it is up to my small team here in Pella to engage with our forwarders and work out the best cost/transit combination to deliver for the dealer.
What delays have you experienced with both air and ocean freight?
We have been really fortunate with our air freight. We have not experienced any significant delays with the majority of our outbound shipments. Neither has our inbound air freight been been affected by any major issue. During the pandemic we did not exclusively stay out of the consolidated market, but we did have a major small parcel partner play a vital role in helping us to keep a lot of our freight moving.
On the ocean side, we have experienced considerable delays during and post pandemic. One lane in particular, to our dealers in Australia which was impacted the most. We have routinely had to swap from West coast to East coast ports to avoid congestion. There were times while pre-planning containers, when we could only hope and pray that we could complete enough product to fill the container. If we had to cancel, we would have would have faced fees for cancelation because we could not have changed the final destination per booking like we could in the past. It stretched our ability and made us think in a new and different way.
One ongoing issue we are still facing when shipping to Australia is larger Ro/Ro shipments and vessel availability. We have been nearly unable to book with our preferred carrier for over a year due to their diminished capacity. We resorted to booking two-part charter vessels in the last year to move a large amount of our Ro/Ro cargo. This obviously comes at a much higher cost and with some risk, as our product is not sailing directly to the end customer, but rather making intermittent stops around the globe prior to arrival.
General port congestion, rail delays, and container shortages in Chicago and Kansas City have caused us further delays at times in nearly all of the markets we serve. Add that to the distance we have to truck our containers to and from the rails and results a great deal of extra time - just in transit we have to remain flexible and inventive.
Have you had more damaged goods with ocean than air?
We have been fortunate that damages have not spiked. The one area where we did have some trouble was with the first Part Charter we did to Australia at the end of 2022. That vessel was not direct and made a number of stops prior to docking in South Australia. A majority of those units, despite being stowed under deck, sustained a lot of saltwater damage. The other unforeseen damage is the time lost in such indirect shipments. Not having a normal direct route creates delays in how long it takes before our dealers/customers can put these machines in to action so they can be profitable.
Have you found ways to lower the costs of air shipping?
Much of our success with air freight is our ability to locate solid trade partners with whom we do business. Many times competition also brings about cost savings. In the last 3 years we have introduced many new competitively priced carriers, not always settling for what the first forwarder or trade partner offered to us.
Our top three air freight providers today look drastically different from those who handling our freight 3 years ago. This was partly due to the shift caused by the pandemic and partly due to growing relationships with partners who wanted to understand our business and what we needed and offering us a fairly priced rate and service structure we could use. One of our partners in particular grew their book of business with us over 200% year over year based on offering us a price and service package that we are still working with today.
Have you found ways to speed up ocean shipping?
Again relationships and competition are key. We have worked with a lot of our trade partners for over 10-15 years, staying loyal to them and making sure that we had that trusted partnership. Those partners are still in the mix for us, but interjecting new relationships, with new ways of thinking and connecting us with new freight providers has helped us to reduce costs. It has kept the incumbents from becoming complacent with their price and service. We have unfortunately had to walk away from a few long-time providers, who did not or could not keep up with our expectations for price and service.
The one area that we will continue to struggle with for both speed and cost in the ocean freight market is our location. We are in the Bermuda triangle of sorts for ocean freight services. Being in Pella, Iowa, we are approximately 5 hours of trucking distance from all major rail ports. This adds cost and time to every shipment. In the past 2 years, Vermeer has been working closely with our freight partners, along with a company in Des Moines, to establish a local network rail depot there. Des Moines Industrial has the infrastructure, the rail capacity, and the desire to handle intermodal containers. What they don’t have yet is the “blessing” from any major steamship line to land containers in Des Moines to serve the state. Getting Des Moines Industrial online for this type of service could be a game changer for not just Vermeer, but other companies doing international business in the state. I could go from getting a container off the rail yard in days, to possibly getting it in my yard within hours of it being unstacked from the train.
What about trucking vs rail to the ports – what are the pros and cons of each?
We have done very little trucking to ports. Nearly all of our outbound containers that leave as full container loads are brought to us empty and loaded full on site in Pella. If we do use a Less than container load service, we will ship product out, but it mainly ships to Chicago to be consolidated. We are far enough away from most major seaports that trucking to them with containers is seldom the best or most cost-effective solution. When container availability was really in rough shape during the pandemic, we did ship some of our machines/parts to a partner in Houston to pack them in containers for us. Containers were more readily available at the port, but that added cost and delays to our entire process.
For more information on Vermeer Corporation, visit its website at www.vermeer.com
Comments