Inside every large tea company today there is a team of people whose job it is to organize and oversee the movement of teas from the producer to warehouses and factories in the consuming country. The job, never an easy one, involves every possible aspect of logistics from knowing the exact weight of the sacks of tea to be shipped and the number of sacks that fit into a container, to freight costs, the size of different ships, capacity at different ports, delays and congestion at those ports, legal requirements, the availability of different teas and the individual company’s requirements for stock.

Every decision involves a balancing of efficiency, time and safety against costs. As a simple example, when deciding whether to use slipsheets or pallets, the logistics team must take various factors into consideration – slipsheets under a stack of tea sacks obviously take up less space than pallets and allow for an extra 20 sacks in each 20-foot container. But, depending on the weight of tea in each sack, will the extra weight make the container too heavy to meet road transportation legislation? Will the extra layer of sacks be damaged while being stuffed into the container? Will the sacks have to be palletized for storage once the container reaches the warehouse and how will that affect costs? Such calculations and decisions are involved at every step of each operation.

As well as all the usual concerns, rising costs have been a major consideration over the past few years. In the past 18 months, freight costs for a 40-foot container from China have increased by more than 30%, from India by more than 50%, and from Indonesia by almost 100%. The increases last year were partly due to rising oil costs but this year the main causes have been the worldwide recession and congestion charges imposed at certain ports.

When economies were booming, particularly in China, international shipping lines invested heavily in new, bigger ships. They could not have known, when they took the decision to expand, that the economic downturn around the globe would drastically reduce the demand for capacity. Today, many of the shipping lines are in serious financial difficulties and a total of 560 ships are currently lying idle – that’s 10% of the world’s total supply of container ships. A container ship’s capacity is defined in ‘twenty-foot equivalent units’ or ‘TEUs’ and the total idle capacity of 560 idle container ships is currently 1.3 million TEUs. This is obviously causing an immense drain on the resources of the companies that own the ships and so they have tried to increase their profits on the ships that are still in use by pushing prices up. This price volatility is a constant headache for logistics managers of tea companies whose fluctuating costs have to be fed into the overall price of the tea and can cause further problems for the commodities team who have already negotiated the price of their blends with retail customers.

There are indications that the situation is beginning to ease and shipping lines appear to be a little busier but this may only be an impression based on the fact that fewer ships are just a little fuller. But there is a sense of watching and waiting, and everyone is exercising caution in this fragile situation. Meanwhile, reduced overall capacity has lead to extra pressure on what shipping space is available and to longer waiting times for space allocations. Space now has to be booked much further ahead in order to safeguard the supply chain. But when weather patterns do not follow the usual trend and, as a result, peak season teas are not ready to ship at the usual time, tea companies can find themselves in a situation where space has been booked but there are no teas to fill it. Shipping departments in every large tea company around the world are constantly juggling supply, space, costs, time and labor in order to make the best use of available capacity.

Logistics managers must ensure that essential tea components are in stock in the warehouse at the appropriate time. If a tea company suddenly finds that its warehouse has not received a vital tea and that a blend cannot be produced for a particular customer, that customer will simply buy from someone else and, having changed suppliers, they are unlikely ever to go back to the company that let them down and caused a blip in the supply chain.

The most serious current problem facing shipping departments is congestion and delays at ports. Ports can be the first to suffer during political unrest (the 2008 elections in Kenya caused major blockages and delays at the ports), and freak weather conditions (when the 2004 tsunami struck Sri Lanka, Colombo port was not directly hit by the tidal wave, but ships bringing aid into the country caused congestion and caused delays for other ships trying to get in and out). But, in the last 18 months, congestion and delays at ports around the world have been due to other factors. In March 2008, Sri Lanka was reported to be worried about delays and congestion caused in Colombo port due to the restricted entrance channels into the port, a lack of berthing and turning space. In October this year, Kolkata port suspended the granting of permission for new berthings because of the backlog of ships waiting to get into the port. And when China cut its export tax rebate in July, some exporters were found to be giving false shipment data thus provoking a higher level of inspections by the authorities and this, in turn, caused major delays and congestion.

In order to try and recoup some of the extra costs caused by congestion, some ports have recently imposed congestion charges. In 2008, Vietnam imposed a congestion charge on shipments into and out of the country and in October 2009, Kolkata and Haldia ports in India imposed a US$250 surcharge per container on the 25,000 or so containers being handled by them every month. The explanation for increased delays there is depth restrictions, lack of space, equipment break-down, extended unloading time from two days to six, and a resulting backlog of some 8,000 containers waiting to be cleared.

The size of modern ships is also a contributory factor. Most modern ships are bigger than ever before with a capacity, on the biggest, of 10,000 TEUs. These enormous ships require sufficient suitable channel depth and sufficient berth depth and space. The unloading, storage and movement of the vast number of containers they carry demands special cranes, huge container parks and essential infrastructure and administration. Only certain ports are equipped to accommodate these ‘super-post-Panamax’ vessels and this adds a further complication to the movement of tea.

Any tea company looking to reduce costs by shipping containers of their stock on these huge vessels will have to make careful considerations as to where the cargo can be landed, how the tea then travels to its final destination, how long that will take and how much it will cost. The port-to-port and any inland transit costs and time may add so much to the equation that any profits gained on the super-post-Panamax ships can be wiped out. And the logistics become yet more complicated.

Congestion due to the volume of traffic has added considerably to lead times. In some cases there is regularly a delay of 1-2 weeks and from some origins, particularly China, it can be longer. And congestion can add to yet further costs as shipping lines bump up the price per container in an attempt to recoup some of their own extra costs.

Companies with concerns for the environment must also factor into their decision-making the impact of these huge container ships. Although these vast ships burn less fuel than would be used by the number of aircraft required to transport the equivalent quantity of tea, they are not a particularly clean mode of transport. In the interests of the environment, some shipping companies have recently reduced their speeds in order to cut back on the amount of fuel used. The average speed from China to the UK used to be 20-22 knots. It is now 17-19 knots and in the opposite direction it is only 16 knots. The environmental gain means longer lead times for the tea company and so further calculations must be made and crucial decisions taken.

Tea companies are not always in a position to make decisions about which shipping line to use and which ports to sail into and out of. If they buy their teas on a ‘delivered’ basis, those decisions are taken by the producing company in the country of origin. But the reduced capacity, the rise in costs and the delays due to congestion are affecting everyone at the moment. Whoever is at the controls – the producer or the buyer - the job of organizing the transportation of tea demands an incredible knowledge and understanding of all the influencing factors, of all the positive and negative effects of each individual small decision that brings the tea into the warehouse – hopefully at just the right time and at just the right cost.