Trucking has traditionally gotten the lion’s share of attention in transportation, but the pandemic-related disruptions to global supply chains, particularly the congestion at ocean ports with dozens of ships waiting offshore to unload, is causing companies to take a new look at their ocean shipping strategies. How are companies navigating through this challenging environment, both in securing capacity and controlling costs? What should companies expect moving forward? Those are the main questions I discussed with Mollie Bailey, VP, International at Transplace, during a recent episode of Talking Logistics.
The State of Ocean Shipping
With the holiday season on everyone’s minds, I asked Mollie to give us her take on the ocean shipping market and whether she expects it to impact the season. Mollie described the current state as “dysfunction junction.” She says that the carriers reacted to the sharp downturn at the beginning of the Covid-19 pandemic and have not yet been able to return to equilibrium as the economy has rebounded. She feels this will definitely impact inventories for the holiday season.
Mollie explains that the disruptions are coming from all geographic areas. “If you want to get on a vessel, you can, it’s just a matter of timing and skyrocketing costs,” Mollie says. “And then there is the uncertainty over backups at the ports and how long it will take for your shipment to be unloaded.
“There’s also problems at the point of origin, with pandemic shutdowns, equipment shortages and congestion globally,” Mollie continues. “There are so many factors that go into moving product from point A to point B. It’s easy to blame the carriers, but this really demonstrates the fragility of the global supply chain.”
How Are Companies Responding?
I asked Mollie how Transplace’s customers have responded to these difficult times. She comments that she is seeing all kinds of creativity in their responses. She notes, for example, one customer who put product from Asia on the Tran-Siberian Railroad to ship to Europe and from there on a boat to the US. “The pricing was cheaper than ocean rates and he said it’s working really well.”
Mollie also mentions that customers are taking advantage of other ports of entry in Canada, and the US East and Gulf coasts. But as they have gotten busier there have been new problems such as a lack of drayage. “We’ve also seen the shift to air freight, but that is expensive and has its own problems, including warehouse and labor shortages. Some are even chartering vessels for their needs. People are open to new options they wouldn’t have considered 18 months ago.”
Dealing with Cost Challenges
With the explosion in ocean rates this year, I asked Mollie how companies are dealing with this challenge. Mollie notes Transplace has been very proactive in informing their customers of the cost increases and capacity issues that were coming from carriers starting as early as July of 2020. “Things have ramped up since then to the point that giving quarterly rates isn’t enough. We now try to give them monthly rates, but often it’s spot market rates as companies scramble for capacity.”
Mollie remarks that one of their customers built up their inventory last fall to try and cover their needs through this holiday season and avoid the current cost increases, but many companies aren’t able to do that. She recommends steadily ordering product when available rather than trying to ramp up for seasonal needs because these cost and capacity issues are not going away anytime soon.
Today’s uncertainties around inventory availability, transportation capacity and costs have disrupted the traditional supply chain practices of balancing inventory and costs. Companies have to weigh these factors against customer expectations and financial viability in ways that are different from the past.
Given all of the uncertainties in the market, I asked Mollie how carriers are working with them. Mollie comments that the big issue has been communications with carriers. Like most of us, they were caught off-guard by the sudden crash and then recovery caused by the pandemic. They have been scrambling to adjust their capacity and deal with labor shortages. She remarks that one carrier’s customer communications portal has a backlog of over 8,000 emails for which they have yet to respond. She says it’s been frustrating and an issue carriers should address.
What to Expect in 2022
I asked Mollie what shippers should expect with ocean shipping in 2022 concerning rates, port congestion, capacity issues and labor shortages, as well as how technology might help. I recommend that you watch the full episode for all of Mollie’s insights and advice on these topics. Then post a comment and keep the discussion going by sharing your own perspective on the state of ocean shipping.