We keep buying and retailers can’t keep up. In the shipping business, it’s the consistent story. Industry pundits continue trying to forecast when “normal” will resume, yet the reality is we’re months away from smooth supply chains, port operations and consumer buying. Here are the questions our clients are asking and how we’re answering to support supply chain planning.
I’m experiencing unprecedented container import delays and congestion. I’ve been importing for decades. Has this ever happened in the shipping industry?
This is an absolutely unprecedented time. There’s no way to adequately describe it other than “drastically congested.” Personal consumption among Americans increased from January 2020 to January 2021 by 10% from $4.8 trillion to $5.3 trillion. Many of the goods ordered are made in China and Asia. Orders include furnishing and household equipment that take up more space in containers. February’s data demonstrates the challenge.
- S. imports from Asia in February jumped 27.3% year over year, which is the seventh consecutive month of double-digit growth.
- Total U.S. containerized imports in February increased 20.3%; imports from China alone jumped 44.3 %, according to PIERS.
- Imports from China in February represented 43.4% of total U.S. imports and 64.3 percent of U.S. imports from Asia, according to PIERS.
Because China is the largest trading partner of the ports of Los Angeles and Long Beach, and the Southern California port complex accounts for about 50% of U.S. imports from Asia, importers can expect continued congestion problems in the Southern California gateway for many more months.
What are the best options for shipments?
An option clients often ask about is transport from the port to the final destination. Instead of rail go truck. Even better, avoid the container and go with air.
The idea to reroute a container feels like the right thing to do, but that can cause additional delays, especially if the container is already en route on a steamship. In normal times, locating a container at the port, having it pulled, processed and reloaded causes a delay. Right now, that delay would be even longer at comes with a high price tag. Some clients have asked about shipping via air. When we price air cargo, many clients find it cost prohibitive.
Is this situation impacting exports from the United States?
Yes, vessels are overbooked, and steamship line allocation teams are pushing the overflow of containers to future bookings, as needed. Many of these delays result bookings delays of several weeks. Sailing dates are changing multiple times with the ripple effect being felt throughout the supply chain. Empty containers for exporters also are at a premium because of the high rates to import from Asia. Steamship lines are moving record amounts of empty containers back to Asia to be used for these imports instead of export shipments.
How can I plan my supply chain now to avoid delays later?
We know this situation isn’t going to resolve itself quickly. Plan supply chains carefully considering how shipments are being impacted today.
- Consider future orders. Steamship lines operate in three Alliances. Understand and know how they work and the options each has. Don’t ship everything in one Alliance. Diversify shipments within these Alliances. If one shipment experiences a delay, it’s likely a shipment on another carrier in a different Alliance will continue through transit. Use this infographic for information on Alliances.
- Know the different port options available. LA/Long Beach is the most congested. Could a shipment move through the Panama Canal to the East Coast more efficiently?
- Consider trucking from a different ramp. Midwest options: Louisville, Cincinnati, Chicago, Cleveland, Columbus, Detroit, St Louis.
Is this impacting only Indiana manufacturers and retailers?
No. This is an ongoing challenge for companies across the United States and even globally. A recent industry article in JOC.com cited two branded companies.
Nike’s inventory delays affected its North America revenue. The delays resulted in a “lack of available supply, delayed shipments to wholesale partners, and lower-than-expected quarterly revenue growth,” according to a Nike representative, who went on to say inventory units in Nike distribution centers declined nearly 20% in 1Q 2021.
Costco Wholesale also cites container shortages and port congestion on arrival delays for certain products, such as furniture, sporting goods, lawn and garden, and some food and sundries. However, Costco’s revenue increased 14.6% for its fiscal second quarter that ended Feb. 14., with its merchandise costs increased 14.7% due to higher freight costs.
Jefferson Clay is director of global sales for Cargo Services, an Indianapolis headquartered freight forwarder. The independently owned and operated company partners with businesses throughout the Midwest to provide import and export services by land, sea and air along with customs brokerage and warehousing and distribution services.