These have been difficult months for logistic providers, businesses and consumers as shipping delays around the world have held up products and supplies with inventory levels being depleted. The shortage in containers and port delays are putting pressure logistic costs, which have generally doubled. “Supply chains may take several more months to return to some semblance of normality as inventory, now trapped further up the supply chain, will need to be cleared,” Ocean Insights’ Chief Operations Officer Josh Brazil reported in February.
Impact on International Shipping
Metrics such as carriers’ schedule reliability are worsening and cargo rollover rates are still on the rise. The average delay for containers increased from one day in January 2020, to more than five days in January 2021. More than 40 cargo ships with tens of thousands of containers were waiting at the ports of Los Angeles and Long Beach in January reported Reuters, with an increase to 62 ships by late February. This has been similar at many US trade gateways.
The Chinese New Year has exacerbated COVID-19 related shipping delays outbound from China. The New Year celebrations now last a month as workers tend to take time off to visit distant homes. Internal travel restrictions imposed by Chinese authorities, requiring domestic travelers to quarantine for 14 days after traveling, has added a new bottleneck. Many Chinese factories have been totally closed for the month of February.
Global Schedule Reliability, declining since the middle of 2020, has not improved through February of this year. It appears that all 20 of the global ports for which Ocean Insights, a data analytics firm, collates data have seen a decline.
“Huge numbers of medical supplies keep on coming along with furniture, appliances, construction material, landscaping, hot tubs and anything related to the outdoors,” said Mario Cordero, executive director at the Port of Long Beach. “Americans that have not been impacted by Covid will continue to spend and the surge could go on through late spring.” (The Wall Street Journal)
Industry executives say shipping rates have increased 50-100% and container rates have almost doubled. Quest Safety Products, a distributor based in Indianapolis, has even seen cancellations when their containers are rolled over because of overbooking but they are still charged cancellation fees. This is starting to result in price increases to the end-user of three to five percent.
On the Domestic Front
On the domestic front, according to FedEx, there are three major factors causing delays:
Heavy Package Volume
The pandemic has created record-breaking shipment volumes. As more people shop online to avoid crowds in stores, those numbers have grown even more. This has created shipping volumes that are taxing logistics networks nationwide, which may cause delays.
COVID-19 business closures
The pandemic continues to cause businesses around the country to close. If you need to send a shipment to an area that’s experiencing closures, contact your recipient before you ship to ensure they’re open and able to receive your package.
Weather and Other Service Disruptions
Seasonal weather events and other disruptions have occurred, causing delays for inbound and outbound shipments. Our top priorities are the safety and well-being of our team members and providing the best service to our customers.
There has been a huge increase in freight volume since the economic contraction. As reported by FedEx, growth in eCommerce is driving small parcel growth. For 2021, FTR Transportation Intelligence forecasts an increase in truck loadings of about 5% and an increase in rates of about 8%. Spot rates are higher depending on disruptions and weather such as in February.
Shipping delays have plagued 2020 and are likely to continue well into 2021 as inventory trapped in the supply chain becomes available and choke points, such as shipping ports, are cleared.
The expectation is that supply pressures will result in higher logistic costs. Expect these to be passed on to end-users.
Maintaining inventory or accepting close alternatives are potential ways to overcome spot shortages that are occurring and likely to continue for some time.
To maintain good customer relationships, it is important for suppliers to:
- Stay in close touch with their customers, keeping them advised of delays quickly so they can take possible steps to mitigate potential problems
- Be honest and open about the delay
- Offer close alternatives when possible
Here at Quest Safety Products, we are working hard to stay ahead of supply chain issues to avoid passing the rising transportation costs off to our customers. If you are looking to diversify your supply chain with a secondary supplier, Quest is experienced in managing the Supplier Change Process to ensure a smooth addition. If this is something your organization is working though, we are here to help.