Chassis Business Model for Maritime Industry

Nelson CabreraNews, Ocean FreightLeave a Comment

The US has been the only country to provide free chassis usage to drivers for almost half a century, but that is soon to change. Starting on May 1, 2011, importers will not likely be able to enter contracts that offer free chassis usage. Ocean shipping companies have always provided the chassis with the container as a unit. This business model began to change two years ago when Maersk Line’s equipment subsidiary Direct Container Link started charging by the day for each chassis.

Thomas Reagan, Director of West Coast Operations at Maersk Equipment Service stated that, “At first, truckers complained about the loss of free equipment, but soon they chose to lease the chassis from DCLI because they were averaging about 1.5 additional moves per day.

John Mizerek, Vice President of Sales at Flexi-Van Leasing says that removing the chassis from the ocean freight company is a good move. When a trucker owns or leases a chassis, they can use it for multiple hauls per day instead of only being able to make use of it on behalf of the ocean shipping line that they borrowed from.

Right now, ocean shipping companies own and loan out almost half of all chassis in the United States and leasing companies own about 45% more of them. Ocean shippers are contracted to provide chassis and other equipment for about 75% of the national fleet. Mizerek says that this makes the ocean shipping industry responsible for all of the maintenance, storage costs, and repairs of all of these chassis.

Ocean carriers are starting to announce their plans for getting out of the practice of supplying chassis. They are currently looking for business models for getting out so that they can figure out who can provide the chassis services for their customers. The President of Container Port Group, Richard Coleman, says that “The process will take several years, but not decades.”

Bill Rooney, ocean shipping industry consultant and former President of Hanjin America says that shippers spend millions of dollars a year on chassis, incurring the expense without gaining a competitive edge in the marketplace. Many ocean carriers have announced their intention to stop supplying chassis to their customers and have already done so in smaller markets.

Coleman pointed out that we would see several business models emerging in the next year or so. The container pool model is already working efficiently in some markets, such as at the Virginia ports, but maintenance and repairs are lacking, so it is likely that chassis pools will only be an interim step, according to Coleman.

Rooney said that this development will be good for the ocean shipping industry because it will drive efficiency. “The whole supply chain is better off when chassis are priced correctly,” he said.

Nelson Cabrera
Nelson leads global business development efforts within LILLY + Associates and has been featured as a logistics expert in numerous publications, including SupplyChainBrain, The Bulletin Panama, Logistics Management, and the Miami Herald.

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