Supply chain disruptions are widespread across international shipping.
The ongoing unpredictability of responses to COVID-19 only suggests that these disruptions are likely to continue.
From cargo backlogs and insufficient empty containers to industrial action and port surcharges, it’s now more important than ever for importers and exporters to be prepared.
We’ve put together a comprehensive guide on how to best prepare for these current and upcoming supply chain disruptions. Read on to learn more.
Overview of current supply chain disruptions in 2021
First, we’ll cover a brief overview of the current supply chain challenges that importers and exporters face.
Lack of empty container equipment
One the most pressing issues we’re facing in international supply chains is a major shortage of empty container equipment.
There is currently a severe container imbalance in countries such as Australia where the demand for imports far outweighs the volume of exports. Subsequently, empty containers are not being repositioned to key markets.
As a consequence, the unavailability of critical empty containers in China is dismally low, meaning the rising demand for imports in Australia (and other major importing nations like the United States) is causing a bottleneck, resulting in significant delays in the supply chain flow.
Backlogs and congestion
COVID-19 was also largely influential in causing backlogs and congestion. When the virus was first announced the industry was unprepared. Volumes were weakened as businesses watched how the economy would react. When a surge in home consumption then began we witnessed one the strongest increases in container demand we’ve ever seen in recent years.
Skyrocketing backlog and increased port congestion resulted in a surge in frustrating delays across supply chains.
Australia’s ports suffered from an unexpected wave of industrial action driven by trade unions.
Work stoppages, overtime bans and overall industrial disharmony caused tremendous amounts of backlog, with the inevitable result being delays and congestion.
Although negotiations between unions and stevedores were finalised earlier in the year, industrial instability remains a pressing issue.
Additional port surcharges
Port stevedores continue to impose significant charges on transport operators.
Most recently, Patrick Terminals introduced new “long-vehicle fees” in its Sydney and Brisbane terminals, expected to cost HPV operators between $36,000 and $108,000 a year.
Figures released by Container Transport Alliance Australia revealed that the average fee for unloading a container off a ship has escalated to unprecedented levels.
Rod Sims, the chairman of the Australian Competition and Consumer Commission, commented that the charges imposed by the port operators were “unconstrained”.
Suez Canal incident
In March 2021, a 400-metre-long container vessel called the Ever Given ran aground in the Suez Canal, blocking traffic in the world’s most commercially significant waterway.
Given that over 50 vessels passed through this canal each and every day, it isn’t surprising that the blockage was causing delays worth approximately $400 million per hour.
Thankfully, the impact on Australian supply chains was not catastrophic as the canal is primarily used for routes to Asia and Europe.
However, we may still feel some ripple effect. Australia still uses the canal to import and export some goods – mainly oil and oil products and a lot of European cargo that tranships in Asia may ultimately be bound for Australia.
For a complete look at the factors, check out our detailed feature and infographic below.
Preparing for the upcoming disruptions
It can be particularly challenging managing your supply chain in this volatile, unpredictable market.
To best prepare for the challenges to come, we recommend:
1. Securing a robust marine insurance policy
With maritime incidents continuing to affect supply chains across the world, it’s more important now than ever to take out a strong marine insurance policy.
The colossal losses suffered in the ONE Apus and APL England container spills solidifies the case that insurance is a business necessity – with an estimation that claims arising from the ONE Apus spill will escalate to $50 million.
The case of the Suez Canal also makes the case, with the owners of the Ever Given having now declared General Average.
‘General Average’ means that stakeholders in a sea venture are all proportionally liable for the losses resulting from a voluntary sacrifice of part of the vessel or its cargo to save everything in the event of an emergency.
It will take some time to calculate exactly how much interested parties will lose from the Suez Canal incident. It will be up to the adjuster – and will reportedly take “anywhere from two to seven years”.
Read more about the importance of marine insurance here.
2. Stock up and plan for additional transit time
As delays could happen at any time, stock up your inventory as much as possible and plan for any contingencies.
Shippers should be factoring in at least two weeks buffer on any freight transit time. But, quite frankly, the more time, the better.
Ocean freight is generally preferable to (and much more affordable than) air freight, but even steady and short trade lanes such as China to Australia are experiencing high delays.
For more information, read our guide on how to plan your freight with changing timelines.
3. Book early and plan ahead
We can’t stress this enough – book your shipment in advance. Otherwise, you’ll risk either:
- Not securing your space on a vessel; or
- Your cargo being ‘rolled’ onto another ship.
For example, if you’re importing from the United States, you’ll soon find that the country is at full capacity for equipment and sailings for at least the next four weeks.
You should be thinking now about shipments one month ahead to secure space and most importantly equipment.
Forgetting to book in advance is one of the most common mistakes made by importers across the industry.
4. Have a back-up plan
‘If something can go wrong, it will go wrong’.
It’s critical to have a back up plan in case your cargo runs into problems.
With the skyrocketing rates of air freight, we’re seeing that ‘air-sea’ solutions (a combination of both air and ocean freight) are becoming increasingly popular this year.
This means you can ship cargo Ex Europe using a combined service, but at half your seafreight transit time and airfreight costs.
5. Check your commitments in service contracts
Have you contractually committed to providing a product or service on a specific date that is dependent on freight?
If so, this can be very risky in a volatile market.
Consider whether these terms can be negotiated before signing a contract.
6. Use the Low Season to your advantage
Usually, from March to August each year, we see some respite in the shipping industry.
This hasn’t happened this year.
Demand remains high and continues to put pressure on all corners of the industry.
Whilst we cannot foresee the end date to the activity, smart importers will be booking now in the anticipation that September peak season could be even more challenging.
Work with Your Freight Forwarder for clear communication
Do you need up-to-date information to plan ahead? This is precisely what ICE provides.
We provide clear tracking at the most detailed level, ensuring that you always know the location of your cargo.
If you need to show your customers or clients evidence of a shipping delay, we’ll provide you comprehensive tracking reports at a frequency that suits you to any variety of members in your business.
As a seasoned freight forwarder and an expert on all things shipping and cargo, we’re well placed to develop a tailored solution for your business and help you best prepare for current and upcoming supply chain disruptions.
Reach out to our friendly team today to start discussing your next shipment or leave a comment below and we’ll be sure to reply.