Once considered a mortal sin in eCommerce, shipping delays are now part of the new norm. Supply chain crisis” has become a buzzword; even high schoolers mention it now. What factors have led to cargo ship delays in 2022 and what can your businesses do to adjust.
Every merchant knows that successful online selling requires timely order fulfillment. Unfortunately, shipping in 2022 has been severely affected by massive delays. These problems are due to several factors, including increasing trade tensions between the U.S. and China and the dwindling qualified workforce to operate the ships. As a business, you must be aware of these potential delays and plan for them in your shipping schedules. Doing so can minimize the impact on your business and maintain your competitive edge.
Global supply chains have had a rough time since 2020. Its reliance on maritime transport is so great that 90% of the world’s goods get transported in containers and ships.
As more products fail to deliver on time, the global shipping industry’s problems continue to pile up. Online merchants must stay current on international affairs impacting the global supply chain.
Understanding the Causes of Cargo Ship Delays
As most of the world’s goods get transported via sea, many countries rely on imports from Asia. In 2021, the value of Chinese imports sent to the United States totaled nearly $43 billion. Furthermore, other major Asian countries supply the U.S., such as Japan, South Korea, and Vietnam.
The COVID-19 pandemic was a significant catalyst in cargo ship delays. For health and safety reasons, much of the world slowed to a crawl as people sought safety in their homes as part of lockdowns. As the doctors and health experts studied the virus, the production and manufacturing of items stopped due to the closure of factories.
While at home, people almost entirely depended on online shopping and eCommerce to safely purchase essential items. As vaccine rollouts started to ramp up, a return to the pre-pandemic life began in 2021. But as demand grew, inventories struggled to keep up. Other factors such as shipping container shortages and rising transportation costs delay item deliveries. This build-up was noticeable during the holiday season last year. Items were in shipping containers on vessels stuck out at sea, while the offloaded goods moved at a snail’s pace because of a depleted workforce.
Another cause of the cargo ship delays was the widespread implementation of “just-in-time” or lean manufacturing. This strategy encourages an “optimized” inventory stock to save space and supply, meaning warehouses are never full of products. While it is remarkably effective in a stable economy, it is susceptible to sudden market changes, such as the COVID-19 pandemic. As delays began to pile up, many factories reported disrupted production cycles that left businesses scrambling for inventory. Despite this, experts see lean manufacturing as a valuable system. Pundits see its problems merely as a failure in implementation and a misunderstanding of its core concepts.
“When you have a problem anywhere in the supply chain, it’s going to have a ripple down effect, like playing dominoes,” says Cathy Roberson, founder, and president of supply chain consulting group Logistics Trends and Insights LLC, and former market analyst at UPS Supply Chain Solutions. “If freight is late arriving at the port, that means the time scheduled for the truck to be at the port is wrong; now you have to go back and reschedule. That will cause additional delays and costs; now you have to put the items in a temporary warehouse if you can find space. Incurring additional costs for that. From there, once you finally get a truck, moving it inland you have to constantly reschedule delivery times. Having to juggle all that, monitor that, takes time and takes people and costs extra money.”
Port congestion also burdens logistics and contributes to cargo ship delays. A study by analysts at the Royal Bank of Canada (RBC) found that one-fifth of the global container ship fleet was currently stuck in congestion at various major ports.
“Global port congestion is worsening and becoming increasingly widespread,” RBC’s Head of Digital Intelligence Strategy, Michael Tran.
Important trading hubs in China, the U.S., and Europe struggle to properly manage hundreds of ships coming in daily.
The State of Cargo Ship Delays in 2022
In 2022, there was hope that the market would show more stability than in the previous two years. Due to events such as the Russian-Ukraine conflict and emerging COVID variants, there is still much uncertainty in the shipping outlook.
“We don’t see the tide turn in 2022,” said Thorsten Meincke, board member for the ocean and air freight at DB Schenker. Meincke said infrastructure problems, labor constraints, high demand, and reduced capacity will continue to trouble the market.
Retailers and manufacturers find it difficult to take advantage of resurgent economic demand.
Lockdowns in China
As part of China’s efforts to further prevent the spread of COVID-19, especially its more transmissible variants, it has put Shanghai under strict lockdown. As a commercial capital of China and home to the world’s largest shipping port, it has severely affected international markets.
The Port of Shanghai is bustling with ships as more and more arrive. Last May, the count stood at 344, an increase over the previous month’s numbers by 34%. This development has significantly increased total travel time. The estimated lead time for shipping an item from a warehouse in China to another location on American soil takes 74 days longer. The prolonged wait time means added costs for warehouses and businesses.
While ports have seen more activity this year, mobility is still fairly limited due to a lack of workforce and an inability to move shipments to and from port premises. A distinct shortage of truck drivers leads to a significant decline in the volume of items moved. Although daily case numbers are getting smaller, governments are wary of potential surges, hence modified lockdowns.
Equipment and Space Scarcity
The constant shortage of equipment and space is pushing up shipping prices in specific lanes. Low schedule reliability levels have forced forwarders to pay premiums for securing the space their goods require, resulting in partially functioning supply chains. Many carriers profited from this development, and the entire industry could bring in $200 billion in profits by the end of the year.
Ports in Los Angeles and Long Beach have seen some of the biggest congestion in the U.S. Many more in Europe are affected by the conflict between Russia and Ukraine. This conflict has led several key European countries to ban Russian-flagged vessels from their ports. Many ships have since been re-routed, pushing increased container ship activity into other European ports.
The congestion in US West Coast ports started when demand for goods rose along with lockdowns. Once ships queued up, carriers and shippers began to use the East Coast instead due to its more convenient proximity, causing additional congestion on that side as well.
Seventy-seven percent (77%) of the world’s ports are experiencing abnormally long turnaround times. Scores of ships remain anchored off the coast of U.S. and Chinese ports, idle and waiting for space to dock.
Many exporters have chosen not to ship items with low-profit margins, citing losses compared to the soaring freight costs.
Helping Your Business to Cope With Cargo Ship Delays
Cargo delays and poor schedule reliability affect businesses by increasing costs and charges, delaying sales and manufacturing. It also ties up sales and cash flows, lower assets turnover, and a heightened risk of inventory damage and spoiling.
Despite the volatile situation, importers and businesses can take many steps to achieve stability and maintain a positive customer experience. Being aware of innovations and cost-effective workarounds can mitigate the losses incurred from delays.
The first is improving communication between freight forwarders and customers. Delays are inevitable, but communicating with your forwarder will provide a more precise transit time. You can provide customers with timely updates to manage their expectations better. If there are any potential delays, then your team can mitigate and plan for them..
Next is to invest in technology for superior supply chain management and visibility at all transport stages. With robust and quality technological solutions, planning is a lot easier. Businesses can manage their supply chains with greater insight into each stage of their goods’ journey. Business leaders’ data-driven decision-making cant accurately reflect the current status of your inventory. Forecasting and planning also help make product acquisition more flexible.
You will also want to spread deliveries through different shipping modes. Working with a network of warehouses means you can have items fulfilled through land, sea, and air depending on distance and lead times. Cargo owners should use such solutions to bypass congested ports and corridors and reduce transit times while striking the optimal balance between costs.
Through every challenge, there are also important lessons to learn. Don’t hesitate to innovate in the face of unpredictable roadblocks. By staying informed you have the advantage of reacting quickly to sudden shifts in the market, whether it’s positive or negative.
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