By Susan Trautman
(As published in Inside Indiana Business Perspectives)
Wondering why you can’t get that new washer/dryer delivered next week, find your favorite products on store shelves or even get a desk for your newly discovered home office? Chalk it up to the long, strange year import companies are navigating.
Our company made 2020 freight predictions back in December 2019. Never would we have predicted this global pandemic, its historic impact, and what feels like a never-ending ripple effect. We envisioned navigating tariffs and new emissions regulations. Instead, we are piloting a complex and interdependent global logistics system, which is backed up and as bumpy as ever due to the pandemic.
Let’s take a look back at the year to understand how we got here and how Indiana companies that depend on importing goods can continue to do business during these unique times.
Q1 Just the beginning
Our team works with agents in over 80 countries to support importing and exporting by land, sea and air. To combat the virus, you may recall China extended the annual Chinese New Year keeping major ports closed for an extended period of unplanned supply chain time.
Empty container boxes that needed to be moved inland in Asia sat on docks through February and early March. Ports including Shanghai, which is the biggest deep-water port in China was closed while even more equipment heading for China continued to move.
These cargo boxes piled up on docks throughout Asia until workers could safely go back to work to move and manage the volume. This created a container imbalance globally. Some of the nation’s largest ports including LA/Long Beach reported the lowest container volumes available in years, and one steamship line even sent two of its largest vessels back to Asia to simply rebalance the container demand.
As our Asian counterparts went back to their jobs in March in the United States, the COVID-19 pandemic resulted in shelter-in-place orders. While our dock workers were (and still are) considered essential, and continued to work, borders began to close between the United States and Canada/Mexico. The rest of us went into quarantine where we shopped online depleting goods in warehouses and on store shelves.
2Q Shipping gets creative (and costly)
During quarantine, cargo continued to move with our team creatively supporting the movement of goods around the world to spite bottlenecks, backups and pileups. Key trends that we managed include:
Closures: With many U.S. manufacturers closed, there wasn’t a need for containers to move. Containers sat idle at ports, storage yards, or parked at dock warehouses.
Cargo the new air passenger: Importers were paying and continue to pay top dollar to move shipments using airlines that lack consumer passengers. Essential goods, including PPE, used this space.
Blank sailings, a new reality: The big three steamship line alliances worked to control vessel space by imposing what is dubbed blank sailings resulting from falling volumes. Container import rates for shipments into the Midwest increased in June by high triple digits with three rate increases. Rates from Asia to West Coast ports increased by 121% and East Coast ports by 24% when compared to 2019.
Q3 The cargo lands
In July and August, a record surge of shipments landed on docks in the United States resulting in a new challenge—a truck chassis shortage. Chassis are those trailers containers sit on so they can be moved by truckers. In early August at the Port of NY/NJ, TRAC Intermodal showed 4,000 chassis available in road-ready condition; by late August that number decreased to 400.
Meanwhile blank sailings continued and were so contentious that Chinese authorities asked major carriers to inject more capacity and less aggressively raise rates in the trans-Pacific trade as spot rates hit highs. Carriers posted the most profitable record second quarter since 2010—$2.7 billion, according to a report from Sea-Intelligence Maritime Analysis. Rates continue to escalate.
According to the Shanghai Containerized Freight Index published in the Journal of Commerce; Asia to U.S. West Coast spot rates increased 230% in October, compared to May 2019 container rates, and East Coast port rates increased 181% for the same time period.
4Q Navigating the new norm
Managing frequent supply chain bottlenecks has become the new norm. Whether you’re a business owner reading this or a consumer, here is our advice:
If you see something you need, get it.
I recently took a trip to IKEA and saw notices posted about supply chain issues. Shrugging my shoulders, I said, “Yep.” My family is now watching the IKEA site for availability and ready to buy as soon as stock comes into the store to accommodate our family’s remote learning and new home offices with desks and chairs.
If you price a shipment, move fast.
There are no more “think it overs” for importers. Far east to Midwest container shipments average about a month in transit with a new lead time of another month to book the space. Airfreight rates are wildly expensive and have a week’s lead time to book. A customer recently took extra time to shop looking for a better rate or timeline. Those extra shop-around days impacted his supply chain because demand takes space within hours.
Plan way ahead.
Industry forecasters expect this situation to continue through early 2021. Review your supply chain now considering how shipments must move to have parts or finished goods. PPE tends to get first priority. How can you work around it?
Diversify supply chain shipments.
Consider splitting SKUs throughout into multiple container shipments to ensure supply chain continuity as each one makes it through the complex array of potential bottlenecks including blank sailings, equipment shortages, chassis, rail systems, tariffs, customs clearance, and more.