Why is the Tugboat Business so Slow?


#1

The railroads and trucking companies are at full capacity. There is a shortage of truck drivers. Shoreside civil construction is strong. The national economy is booming with a shortage of skilled labor.

Why isnt the tug and barge business busy too?


#2

Because of the drive towards smaller stockpiles and lower supply chain latency. Basically, there are logistical incentives to move a little bit at at time that outweigh the efficiency benefits of moving large loads. Avoiding the capital cost of owning raw stock, associated spoilage risk and property expenses, enable warehouseless factories to overbid traditional operations. As far as I understand, this trend was started by the Japanese back in the 60s or so, and continues to shape supply chain management on all levels in the West.


#3

As you said, just-in-time inventory has been around since the 1960’s and was pretty well established in the US during the high interest rate late 70’s and 80’s. This is not a good explanation for the current low tug and barge utilization.

A lot of the slow down in tugboat business is a hangover from the 2014 oil patch collapse. Desperate bayou companies underbid local East Coast companies for jobs, but that should not be much of a factor on the West Coast, especially in 2018.


#4

This is not something that happened suddenly back then, it is an ongoing trend. Among other examples, the spare parts business in Europe has changed radically in the past decade, with most companies now maintaining a central logistical hub in the Benelux area and offering next-day shipping to their NSOs. I would assume that the same trend affects the US market. I would also assume that so long as this shift is going on, every variation in the overall transportation business will tend to shift customers towards the more modern option; Contracts are terminated at the market downturn and re-evaluated when business picks back up. Thus, air freight steals customers from trucks, which steal customers from rail, which steals customers from ships. Or so I thought, anyway…


#5

Part of the reason is that MARAD is a shit-show. If you go to the MARAD website and click under “America’s Marine Highway Program,” the last news release was posted August 11, 2010. The Marine Highway came about only because in 2007 Congress required DoT to establish a short sea transportation program. As near as I can tell, MARAD issued one report to Congress in 2011 and awarded a few million dollars in grants. Then they called it quits.


#6

Why is the Tugboat Business so Slow?

Because tugboats have gearing ratios that favour power over speed, reckon.


#7

MARAD may be an utterly useless, but that has absolutely nothing to do with the tugboat business being excluded from the current economic boom.


#8

The way you prefaced your question made me think you were really talking about short sea transportation, as opposed to purely “tug and barge” utilization.

But since short sea transportation as a category includes most tug and barge utilization, I don’t know how you can say that the Marine Highway Program has nothing to do with the tugboat business.


#9

Phthphth… :wink: