Over halfway through 2022 we are still dealing with significant risk and uncertainty in supply chain management. And if you’re an importer or exporter moving goods via ocean carriers and ports around the world, it’s safe to say that every day is a new adventure. What special challenges are companies facing today? Which trends should companies keep an eye on? What actions should companies take to mitigate the current risks, and how can 3PL partners help? Those are the main questions I discussed with Mollie Bailey, VP, International at Transplace, in a recent episode of Talking Logistics.
Key Supply Chain Challenges
I started our discussion asking Mollie for her thoughts on the current challenges facing supply chain professionals. Mollie comments that the current challenges started with the pandemic two and a half years ago which put a spotlight on our transportation infrastructure problems. Although there has been a lot of focus since on challenges such as port congestion, container dwell times, and railroad and trucking equipment issues, many problems have only gotten worse. Mollie points out that the complexity comes in the handoffs between modes. Container dwell times have actually gotten longer at the Southern California ports, for example.
Mollie says she gets a sense from her customers that executives are becoming fatigued hearing the same problems being discussed without apparent resolution. “They ask, why are transit times still double and why are inventory carrying costs still way up,” Mollie notes. “And while we have seen some compression in trans-Pacific rates, overall operational efficiency has not improved on international shipping.”
OSRA and FLOW: Are They Helping?
To address these challenges, the Biden Administration has made improving the global supply chain a top priority, with the Ocean Shipping Reform Act (OSRA) and the U.S. Department of Transportation’s Freight Logistics Optimization Works (FLOW) initiatives. I asked Mollie if they are helping.
Mollie says while she is optimistic about the potential of these initiatives, OSRA was just signed on June 16 with a lot of “TBDs” yet to be worked out. “I am super excited about the detention and demurrage piece of that legislation because five U.S. ports are among the worst in the world in this area,” she says. “The ability to enforce fair practices for this is hugely important.”
Mollie is also excited about the prioritization of export cargo, which she says is needed because carriers are favoring relocating empty containers over exports. But she wonders how that will be enforced.
Conversely, Mollie hasn’t seen much coming from the FLOW initiative so far. She states that improvement is needed because the rail network in the U.S. is broken and this impacts port terminals and other parts of the supply chain. But none of these things are going to be solved overnight.
Navigating the Challenges
I next asked Mollie what companies can do to help navigate these challenging issues. She notes that companies must continue to do many of the things they have already been doing. For example, shippers must build in extended lead times, especially from Europe where they are having severe congestion and labor issues/shortages.
Mollie suggests using smaller ports to avoid congestion, particularly on the East and Gulf coasts, and to collaborate with carriers to find solutions and hold them to their obligations. She also says to consider the spot market since some of those rates may have dropped below higher contracted rates set earlier in the year.
How Can 3PL Partners Help?
With all of the challenges going on, I asked Mollie how 3PL partners can help. Mollie notes that there is a tremendous amount going on daily in the global supply chain for companies to keep track of. She states that is one area where a 3PL can help. They can keep their customers aware of all of the changes, legislation, and events that are happening so customers can react quickly and appropriately.
“It all comes down to data,” Mollie says. “It’s visibility to what is happening with their freight movements and analyzing the data surrounding them so shippers can make good decisions. It’s also about providing peer-to-peer benchmarking data so customers know how well they’re doing versus the industry. Providing market intelligence and global expertise are important benefits 3PLs offer.”
With so many issues and challenges facing supply chains, and with executives becoming frustrated and fatigued with the slow pace of improvements, I asked Mollie how supply chain professionals should be communicating with their CEOs and CFOs. Mollie provides both some optimism and some practical advice on this topic, so I encourage you to watch the full episode for all the details. Then keep the conversation going by posting a comment with your own questions or comments.