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The "Magic Mix" for Freight: Why the Best Shipping Solution Isn't Always Black and White
In an era defined by unprecedented volatility in global freight markets, marked by fluctuating rates, port congestion, geopolitical tensions, and a growing emphasis on sustainability, businesses are compelled to explore innovative strategies to navigate these complexities.
This interview with Henning Mormann, Vice President | Global Skybridge at DB SCHENKER, delves into the viability and effectiveness of intermodal solutions as a crucial approach to overcoming current supply chain challenges. Mormann's expert perspectives illuminate how the strategic combination of different transportation modes can offer a resilient and efficient path forward.
We see significant volatility in freight rates. Given the cost pressures, how can businesses explore more cost-effective options, and where do intermodal solutions fit into this picture?
Henning Mormann: In an article I read recently, the air freight market was called “the biggest rollercoaster on earth.” This showcases quite well how volatile rates in the global freight market have developed in recent years – not only in air freight but also in ocean freight. For example, we’ve seen drastic and sudden market changes when the Covid-19 pandemic hit, or the Ever Given Container ship blocked the Suez Canal in 2021. And quite recently, the strong eCommerce boom out of China has also heavily impacted air freight rates on certain trade lanes. At the same time, we’re still having issues in the Red Sea that force vessels to avoid using the Suez Channel. Vessels now need to circumvent Africa instead, which has a huge impact on ocean freight capacity and rates accordingly.
So, if rates on a specific trade lane rise significantly for a specific mode of transport, shippers often need to find alternative solutions to ensure that their transportation costs don’t go through the roof. Here, combining sea and air freight can be a game-changer.
If for example, air freight rates out of China or Southeast Asia would suddenly peak, it would make sense for shippers to transport the goods via ocean freight to one of our transshipment hubs in Japan, Dubai or Sri Lanka instead and use cheaper air freight rates from there to get their goods to the final destination.
When you compare intermodal sea/air shipments with pure air freight shipments, the intermodal solution is often more than 30% lower in cost. But still, it is much faster than shipping by ocean freight.
It helps to not only think in black and white and only consider air OR sea freight for shipments, when the smartest solution could be a combination of both. Or to put it in other words: Sometimes the magic is in the mix!
Port and airport congestion are causing major delays. How can businesses diversify their transportation modes to alleviate these bottlenecks, and how does intermodal transport help bypass some of these pain points?
Henning Mormann: We’ve seen recently how hard it was to get air freight capacity out of China due to the high eCommerce volumes that were exported from there to Europe and the US. On the one hand, this had a strong impact on rate levels, and on the other hand, shippers and forwarders were desperate to get actual space on the air carriers for their shipments. Our solution was to bypass the congested airports in China and to ship goods to one of our Skybridge hubs in Dubai. This really made a difference for our customers. They now had a solution that was not only significantly cheaper but also provided the service reliability that they needed, which forwarders could not guarantee via air freight at that time.
Geopolitical tensions are disrupting traditional shipping routes. How can businesses build more flexible and adaptable supply chains, and what role can intermodal solutions play in providing alternative routing options?
Henning Mormann: Shippers always need to consider at least three key aspects when building their supply chains, and that are: cost, speed, and reliability. How fast do I get my goods from A to B? What are the costs attached to that? And how stable is my supply chain? If one of these key aspects is negatively impacted, alternatives become a need and not just a luxury. Let’s take the Red Sea and Suez Channel disruptions once again as an example. From one day to the other, vessels had to take a detour around the Cape of Good Hope in South Africa and couldn’t take the short cut via the Suez Channel anymore. This had a severe impact on the ocean freight transit times.
So, if shippers stuck to ocean freight, they had to commit on speed. If they changed to air freight, they had to commit on cost. While if they went for combined sea/air transportation, they even improved their transit times while keeping their costs on the lower end. Because with our Skybridge solutions via Dubai, we are able to significantly reduce the lead times for our customers’ shipments, as the detour around Africa is replaced by a fast air freight leg from Dubai to Europe.
Sustainability is a growing concern. How can businesses reduce their carbon footprint in freight transportation, and how do the efficiencies of intermodal transport contribute to achieving those sustainability goals?
Henning Mormann: Luckily, shippers have more and more options to reduce their carbon footprint. Some solutions, like optimizing transport networks to reduce the actual milage of shipments, help companies to save emissions on the one hand and save money on the other hand. However, the efficiency and effectiveness of these measures is often not that high. Other solutions, like for example flying shipments on sustainable aviation fuel, have quite a significant impact on CO² emissions but come with a subsequent price, as sustainable aviation fuel is still significantly more expensive than kerosine.
Combining sea and air freight is a highly efficient way to reduce emissions, as sea freight is significantly more carbon-efficient than air freight for long distances, while air freight can be used for the final leg to meet time-sensitive demands. This hybrid approach minimizes the reliance on high-emission air transportation while maintaining delivery speed. And it is also highly effective: Our Skybridge services reduce CO² emissions by up to 50 % versus shipping goods the entire distance via air freight.
This is also one of the reasons why we see more and more customers from all kinds of vertical markets relying on our Skybridge services.
Given the current complexities, what are the key considerations for businesses looking to implement or expand their use of intermodal transport?
Henning Mormann: As mentioned before: Shippers often only look at air OR ocean freight solutions for the transportation of their goods. Intermodal transport however is combining the best aspects of both into a third option: You may call it deferred air freight or expedited ocean freight. It is a cheaper option compared to pure air freight, yet it is much faster than pure ocean freight.
At the same time, intermodal transportation is a very cost-efficient solution to effectively reduce CO² emissions and it is also a great way to mitigate supply chain risks, as it gives shippers more flexibility to build up their supply chains – and volatile times like today require flexible solutions.
In Conclusion
This insightful interview with Henning Mormann, Vice President | Global Skybridge, underscores the compelling advantages of intermodal transportation as a strategic response to the multifaceted challenges of modern-day supply chains. Mormann advocates for a shift in perspective, encouraging businesses to consider intermodal transport not just as a compromise, but as a powerful "third option" that blends the cost-efficiency of ocean freight with the speed of air freight, offering enhanced resilience, flexibility, and environmental responsibility in today's dynamic global landscape.
