As a result of the recent pandemic, maintaining the chain of supply has proven to be difficult for businesses across a wide range of industries. At the peak COVID-19 lockdowns, demand for many products decreased, but as the world returns to normal and demand continues to increase dramatically, the shipping industry finds itself struggling to keep up. Cost per container has increased rapidly from around 1,500 USD in 2019 to 7,600 USD in July of 2022 and peaking at over 10,000 USD in September of 2021, impacting the market for medium to large goods the most, especially those of lower value and regular demand. With this shortage, the cost of other methods of transportation, such as airfreight, has increased due to the high market demand and low supply, with airfreight rates between Hong Kong and North America as high as 12.72 USD per kilogram.
How to effectively deal with the current shipping container shortage
- There are several new techniques which companies can implement to get their chain of supply flowing once again. Creating direct lines between ports, cross docking, using break bulk shipping, and locally sourcing parts are effective ways to ease strain on the market for containers.
- Break bulk shipping specifically is beneficial, as it allows for oversized goods to be shipped in their entirety, cutting out the need for a container. For this same reason, smaller ports can be utilized rather than being restricted to large ports that can accommodate massive container ships. This frees up more container space for those goods that need it as well.
- Another valuable practice is cross docking, the immediate loading of inbound goods onto outbound vehicles, in turn eliminating the need for storage in between. This is used to create a quick turnaround process and effectively lower the margin of time needed to store goods, freeing up the container for its next use rather than using it for storage at a port or in a warehouse. Ownership of your container loop and contractually allocating containers to specific supply chains supports the consistent availability of containers.
- Although sourcing parts from other countries may come at a cheaper cost, the uncertainty and extended delivery times in accompaniment are proving that locally sourcing goods may have greater benefits. Having your suppliers nearby not only decreases the time in transit but can cut out the need for maritime transportation.
Transparency is key to a running supply chain
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Andreas Niedermeier, Managing Partner, P3 USA
To reduce these crippling restraints, we are helping our customers implement several broad strategies to create a more efficient, cost-effective supply chain. By putting in place ways for companies to track not only main suppliers but also sub suppliers, companies can ensure their main suppliers are able to acquire the materials they need in order to fulfill orders, better understand which of their suppliers are having issues, and plan in the event of a delay.
Why P3?
P3 has been solving supply-chain problems across different industries for many years. Our consultants have access to valuable data from past projects, as well as real-time insights into current transport & logistics issues, especially for car manufacturers. We strive to assist US manufacturers in overcoming the dynamic issues of the global supply chain through this expertise, and our wholistic approach to problem solving.
Source: P3
