Impact of slow steaming on shipper’s inventory

“Slow steaming started becoming de rigeur in 2007”(Visser, 2010). Container ships are now operating at a lower speed than maximum: between 18 knots and 20 knots. Carriers benefit from slow teaming due to reduced fuel costs and elimination of vessel overcapacity. On the other hand, shippers are forced to reconfigure their supply chain and manage their inventory due to longer transit time. This research paper studies the impact of slow steaming from a shipper’s perspective with the main focus being on the inventory management. The research question “what is the impact of slow steaming on shipper’s inventory” is answered by making a comparison between theory from existing literature and interviews with EVO, a shippers’ organization and a shipper. The result shows that longer transit time due to slow steaming causes shippers to manage their inventory levels in order to meet the demand of the end customer. This entails increase in inventory cost as well as capital expense for having to keep additional inventory. Shippers using Just In Time model are mostly affected and in practice, to respond to long transit time shippers in reality set safety stock according to a mixture of 3 approaches: time supply, shortage costing and service level approach.