Fragility of Suez Infrastructure Exposes Vulnerability of Global Supply Chains

Covid-19 and the Ever Given incident show the significance of the impact on supply chains. These examples make crystal clear that supply chains depend on stable and secure physical infrastructure.

Without stable and secure infrastructure, extended (global) supply chains invite unnecessary risk.

Infrastructure is the great enabler making international commerce possible. China’s Belt and Road Initiative underscores this point.

This post will look at impacts of infrastructure on global shipping.

Also since infrastructure has global impacts, it’s vital to assess their risks to your supply chain.

 

Infrastructure Vulnerabilities Affect Your Supply Chain and Beyond

To begin with, there are seven major trade route chokepoints. They are the Suez Canal, the Panama Canal, and the Strait of Hormuz. Four other chokepoints relate to oil shipments. These include the SUMED pipeline, Bab el-Mandeb, the Danish Straits, and the Turkish Straits.

Obstruction of any of these chokepoints will affect the global economy. With over ninety percent of world trade conducted on water, you can expect the impacts to be enormous.

Obstructions of chokepoints will result in ripple effects (bottleneck and bullwhip) throughout the supply chain.

One critical effect is cost. In the case of the Suez blockage, USA Today reported the total estimated cost at $1 billion. Cost of shipping will continue to increase due to delays that result in:

  • Costs due to delays, spoilage, damage of detained cargo.
  • Shipping costs for fuel and containers.
  • Canal, port, and terminal congestion.
  • Shortages of ship and container availability.
  • Supply shortages.

Other potential negative impacts include:

  • Theft
  • Terrorism
  • Damage to your brand, and
  • Loss of market share and customers

As you can see, infrastructure extends into many areas. It affects your supply chain and your business. That’s why infrastructure should be a critical component of supply chain planning.

 

Review Your Exposure to Fragile Infrastructure

To build a resilient supply chain, you must consider how infrastructure can affect it. Below are some items to consider.

Use these to help filter out negative impacts like port congestion, capacity shortages and shipping costs.

  • What percentage of your business depends upon ocean shipping?
  • What percentage of that ocean shipping is exposed to the major chokepoints?
  • If the percentages are significant, or out of balance, can you diversify that exposure?
  • Can you reduce infrastructure impacts by assessing transportation costs and tariffs?
  • What ports do you use today? What shape are those ports in?
  • Can you reduce or expand the number of ports to diversify for costs and congestion?
  • Have you identified backup ports to allow for re-routing as needed?
  • Can you influence on-shoring or near-shoring to reduce transportation risk?
  • Can you reduce infrastructure risk by optimizing intermodal solutions?
  • Does your supply chain have seamless, end-to-end communications (phone, computer, etc.)
  • Do you have a reliable network of partners who can facilitate and troubleshoot issues on the spot?
  • If so, is your network global with worldwide reach?
  • Can you remove unnecessary complexity and simplify your supply chain ?
  • Do you work with a reliable and professional 3PL to manage your supply chain?

This is only a start. These questions will help you consider potential courses of action. They, in turn, should lead to lead the consideration of other viable alternatives. In your analysis, be sure to address prevention, avoidance, mitigation, and recovery.

Your goals are to build-in adaptability and resilience. Building them into your supply chain will help you achieve a sense-and-respond capability.

A sense-and-respond capability enables real-time decision-making. And that can help reduce the effects of infrastructure’s impacts.

 

The Way Ahead in 2021

The absence of reliable, secure, and safe infrastructure may affect seamless trade. This can result in undue risk and potential chaos. The grounding of the Ever Given provides a timely lesson in how infrastructure impacts supply chains.

So, assessing infrastructure vulnerabilities should be a key part of your supply chain planning. More important is putting that lesson to use.

If you haven’t already done so, now is the time to build adaptability and resilience into your supply chain.

American Global Logistics  has the capabilities to help you navigate infrastructure’s minefields. Reducing risk is another aspect at which we excel. And we’ll also help reduce complexity.

We rely on our people, processes, and innovation to ensure the viability of your supply chain.

Check out what makes us different from other 3PLs. Contact us here to start the conversation.

Suez Canal Supply Chain Disruption Calls Globalization into Question

On March 23, 2021, the Ever Given, one of the world’s largest container ships, went aground in the Suez Canal. It ran aground due to a sandstorm and high winds.

The highly stacked containers acted as sails. And that caused the wind to blow the ship sideways blocking the canal. That obstructed all traffic flow through the canal until March 29, 2021.

That further caused a host of issues with global impacts.

Earlier this year, we featured a blog post: January Sets the Stage for 2021: Supply Chain Disruptions Continue”. That post asserted Covid-19’s lingering effects would continue to adversely affect operations.

We also stated that 2021 would be a year of resilience and stabilization. But with the Ever Given’s grounding, resilience and stabilization are now more challenging,

As the Ever Given’s grounding in the Suez Canal shows, you should expect supply chain disruptions. They’re becoming common rather than rare. In this case, the grounding was a weather-related event that defied human control. There’s no avoiding the unexpected.

So, you should expect supply chain disruptions to occur. According to Robert Koopman, WTO’s chief economist, dealing with disruptions, is “… all part of doing business in today’s interconnected global economy.”

Given that, the Suez Canal disaster serves as model case study in supply chain disruption. And it was a whopper of a supply chain disruption. On a macro-level, the Suez Canal grounding is one for the history books.

This single supply disruption caused significant, multiple impacts. And that will further strain resilience and stabilization on a global scale. Moreover, this exacerbates the lingering effects of the pandemic.

You could say the effects are epic. Some have been quantified, others have yet to be quantified. (We’ll cover the impacts below.)

On a macro level four key issues arise. They include supply chain management, supply chain risk management, infrastructure issues, and globalization/global trade.

This post will focus on the global impacts of globalization to your business. We’ll address the other three macro issues in upcoming posts.

 

Globalization and Global Trade – Costs and Benefits 

Globalization exists today and has grown because of its inherent benefits. It optimizes the use of cheap labor, expertise, and natural resources. It also spurs innovation, which leads to better, faster product development and service.

That leads to, in most cases, lowest cost or best price to the consumer. It also improves availability of products and services as they’re available worldwide.

In general, those are globalization’s benefits. You can agree the benefits area not insubstantial.

That said, it’s time to ask whether globalization takes on too much risk? This latest supply chain disruption, calls globalization into question. To answer that let’s look at the impacts of this latest supply chain disruption.

 

Direct and Indirect Impacts of the Suez Canal Disaster

As stated, this was a whopper of a supply chain disruption. As a result, the negative effects were plenty. Some are new and others compound the pandemic’s residual effects.

At its peak, the grounding of the Ever Given caused the blockage of 450 ships. Those ships carried commodities like livestock, gas, oil, water, and food. Without further ado here are the direct and indirect impacts of this disaster.

  1. Further degradation of transportation reliability and increased port congestion.
  2. More and extended delays due to rerouting and time lost in re-floating the Ever Given.
  3. Increased and extended delays will cause supply shortages caused – compounding the effects of the pandemic.
  4. Increased capacity shortages further compounding capacity issues related to the pandemic.
  5. Increased blank sailings causing further delays on top of structured blank sailings from the pandemic.
  6. Out-of-control price increases impacting suppliers, manufacturers, shippers, and consumers.
  7. Although global economic damage is too early to quantify, Allianz estimates a reduction in trade of 0.2 to 0.4 percent.
  8. A BBC report estimates the cost to the Suez Canal Authority at $14-$15 million /day. That comes to about $98-$105 million for the 7-day period.
  9. Some ships traveling from Asia to the Middle East have increased rental costs 47% to $2.2 million (WSJ)

There may be more impacts, but these nine show this is no small problem. That means stakeholders likely won’t mitigate these impacts easily or quickly. This disruption left no one untouched.

An Allianz Research note stated: “The problem is that the Suez Canal blockage is the straw that breaks global trade’s back.”

This implies globalization’s costs may exceed its benefits. More important, you must assess your exposure to globalization’s risks. You must decide whether you can afford to take on these risks. And then you must determine whether and how to mitigate those risks.

With the diversification of supply chains already underway, this natural disaster reinforces that trend.

 

Key Lessons Learned from the Suez Canal Disaster

Hindsight is always 20/20. That’s good news because it means we can learn from past events/disasters like this one.

This disaster makes four lessons clear:

  1. The infrastructure supporting global trade is fragile and vulnerable, highlighting the heightened risk of global trade.
  2. The costs of maintaining the status quo are too high. This reinforces the trend toward diversification of sources.
  3. Logistics is a strategic endeavor and now ranks with operations in importance, as unpredictability reveals its commonness.

Today’s world of globalized trade, due to its size and scope, results in worldwide impacts. Those impacts are logistic, financial, and economic. They also have geo-political ramifications.

With that, the grounding of the Ever Given should serve as a warning to the viability of global trade. This disruption shows that risks to global trade are inherently serious and hazardous.

In today’s complex world, supply chain management has become a strategic endeavor. It also one dominated by professionals. That makes outsourcing with a reliable partner a key part of your business strategy.

At American Global Logistics  we have experienced teams of experts, specialists, and a worldwide network you can leverage to meet your daily and long-term challenges.

Contact American Global Logistics  to find out more about becoming your strategic partner. When you partner with us, you’ll partner with a trustworthy, professional, and seasoned 3PL.

Silicon Chip Shortage Disrupts Supply Chains

On February 11, 2021, President Biden explicitly stated: “If we don’t get moving, they’re going to eat our lunch.” He was referring to the Chinese.

That’s in stark contrast to his campaign statement that China is no competition for the U.S.

Those contradictory statements create uncertainty and risk for businesses.

Be that as it may, both will continue to disrupt supply chains. As a shipper, you need to understand that unchanging reality.

Let’s look at a case currently in the news: the global supply shortage of silicon chips.

Today, we have a global shortage of silicon chips due to the pandemic, trade policy, regulation, and former sourcing decisions. These four factors have combined to disrupt the semiconductor industry and the auto industry.

The pandemic created an explosion of demand as workers began working from home, affecting today’s availability. Also, trade policy restricting trade with certain semiconductor companies has affected the industry as well. Finally, past business decisions to source the production of semiconductors outside the U.S. have further exacerbated today’s semiconductor shortage.

With this one case, four different risk factors have combined to cause work slowdowns and stoppages at Ford (Kentucky), Toyota (China), Fiat Chrysler (Canada & Mexico). Also, Volkswagen stated the shortage will hinder operations in China, Europe, and the U.S.

This case illustrates the spontaneous nature of risks and their severe impacts.

The semiconductor and auto industry are in the middle of this crisis. So, out of necessity, industry stakeholders have focused on finding a near-term solution. That’s not a good situation in which to find yourself.

A better prospect is to position your company for success now. Successful businesses prevent, avoid, or mitigate the disruptive effects battering these industries now. They’re staking steps now to insulate themselves from what may come tomorrow.

This blog post will examine how you can build a more reliable, responsive, and resilient supply chain.

 

How You Can Prevent, Avoid, or Mitigate Major Supply Chain Disruptions 

Fortunately, there’s no shortage of ways and means to reduce risks to your supply chain. Two questions arise that will influence your supply chain risk management program.

  • First, how much you want to invest in thwarting the effects of a myriad of supply chain disruptions?
  • Second, what types of disruptions do you want to insulate yourself against?

But these aren’t the only questions to address. However, they’re the primary questions you must address from a big picture perspective. With that let’s look at several proven ways that work.

Diversify Sources. This one is not only obvious in our post-pandemic environment, but it’s also growing in popularity. Many companies are already doing this on their own initiative. And the recently signed USMCA also encourages near-shoring and onshoring. This new trade deal calls for tariff-free exports to the U.S. codifying a change in sourcing behavior.

Good business decisions, laws, policies and regulations can help to insulate supply chains.

Depending on the industry affected, this is a mid- to long-term solution. In the end, it will have a major effect on reliability, responsiveness, and resilience.

Relook Your Stockage Requirements. Stockage requirements at many companies are not up-to-date. They support yesterday’s requirements, but they aren’t relevant for today’s. If you haven’t reexamined your stockage requirement in the last few years, now is the time to dust them off.

As you recalculate your stockage requirements, you need relook your stockage goals. Informed by Covid-19, you should update stockage requirements from a strategic view. That is, you should consider the long-terms effects of disruptions on your operations.

Stock-outs ran rampant during the pandemic, and some companies are still recovering. However, increased stockage requirements lead to increased upfront costs. That’s a fact. But studies show they’re cheaper than the cost of long-term effects on your business. (See Reducing the Risk of Supply Chain Disruptions.)

Open and Frequent Communications. Comparisons of supply chains to living organisms are often made. That’s not absurd, and it actually makes for a useful comparison.

I’m sure you’ve heard of supply chains referred to as “living networks”. That description takes into account the interconnected nature of supply chains. And with the advancement of technology, those “connections” have multiplied.

So what capabilities do we get from living networks?

Well, we have instant communications. We have cross-domain communications. We have mobile communications. And we have global communications.

We have a variety of voice, email, and texting capabilities. All that has contributed to the expansion of networks and our reliance on those networks. And that has increased communications’ value.

It’s a critical tool that makes supply chains run. That’s an obvious statement. But it bears underscoring because without communications, supply chains can’t work.

It enabled real-time situation awareness, which has enabled real-time management of daily operations. It also enabled the ability to communicate with industry stakeholders and officials at all levels of government. That allows us to dialog and influence upcoming laws, policies, and regulations.

Effectively used and implemented, our communications networks help in preventing, avoiding and mitigating disruptions.

Leveraging Long-term Relationships.  There was a shift taking place in how we do business before the pandemic. The industry was shifting from a transactional-based business model to a partnership-based model. That trend as well as others has accelerated since the pandemic.

It only makes sense for shippers and 3PLs to seek long-term working relationships. That’s because today’s complex problems demand long-term thinking to create to long-term solutions. The semiconductor industry recognizes this. That’s why it lobbied Congress to address the bigger issue surrounding semiconductor shortages.

Meanwhile, notwithstanding onshoring and near-shoring, globalization still affects business.

We continue to operate in a strategic, global environment. And that requires strategic, global thinking. To address problems from a strategic view implies working more closely as partners. Working closely engenders trust that’s needed to identify root causes to festering issues.

As we discussed above with the rise of cross-domain communications, shippers and 3PLs can work collaboratively towards relevant solutions. That breeds and promotes innovative thinking, and that fosters customized solutions.

Against that backdrop your business can thrive in the short- and long-term. Disruptions will threaten your operations, but purposeful preparation can shield your business. You’ll be well-positioned to build a reliable, resilient, and responsive supply chain.

 

There’s No Reason for Being Blind-sided by Supply Chain Disruptions 

As we’ve written in this blog before, supply chain disruptions aren’t going away. On the contrary, they’re coming. And they’re increasing in scope, frequency, and severity.

As we saw with the case of the semiconductor industry and auto industry, disruptions may combine to wreak even greater havoc.

That’s the new status quo. Since future supply disruptions are inevitable, you must prepare today for tomorrow’s disruptions.

Are you slammed by the churn and challenges of daily requirements? Perhaps you don’t have time to even think about supply chain disruptions.

If one or both of these are true, there’s still no reason for being blind-sided by future supply chain disruption.

You can still build a reliable, responsive and resilient supply chain.

You can do that by working with a 3PL whose full-time job is logistics management.

 

Work with an Experienced and Expert 3PL

Why not benefit from third-party experience and expertise? You have nothing to lose.

At American Global Logistics we pride ourselves on being a relationship company. We look for long-term relationships with shippers because today’s problems require strategic solutions.

At American Global Logistics we take a holistic view of supply chain risk management. Our long-term partnerships help insulate our clients through strategic thinking.

We take both a defensive as well as an offensive posture to manage supply chain disruptions. And we manage disruptions before, during and after they occur. We’re proactive in managing disruptions. We respond rather than react.

Do you respond to disruptions, or do you react to them?

Contact us if you want to become more proactive in managing disruptions yet to come.

Meeting the IMO’s Strict Guidelines with Wind-powered Cargo Ships

Innovation has played a significant role in logistics throughout history. To see how far innovation takes us, let’s go back in time to 3400 B.C.

That’s when the ancient Egyptians modernized shipping with the invention of sailing ships.

Since then the logistics industry has looked to innovation to modernize logistics. Later, the shipping industry moved on to steam-powered ships and then to fuel-powered ships. Innovation led to us faster and more powerful ships with greater mobility.

However, the current fuel-powered ships have one major drawback. They’re polluters, contributing more than 2 percent of the world’s carbon emissions. That’s unsustainable. And that’s why the IMO stepped in to regulate carbon emissions several years ago.

In particular, the IMO’s Zero Carbon Emission ruling mandates a goal of zero carbon emissions by 2050.

Achieving this aggressive goal cannot be achieved without innovation. Consequently, stakeholders are pursuing several innovative ideas. But no one knows which idea will become commercially viable.

One intriguing, innovative idea employs the use of wind power. One company, Neoline takes us back to 3400 B.C., with the invention of sailing ships by ancient Egyptians. Currently, Neoline, is developing a modern, wind-powered ship using sails.

Neoline hopes to convert this ancient solution into a modernized, commercially viable wind-powered ship that will help in meeting IMO’s aggressive goal.

This blog post will look at the viability of pursuing wind power to help meet IMO’s decarbonization mandate.

 

Supporting IMO’s 2050 Mandate by Re-imaging the Sailboat

The IMO 2050 mandate is the impetus for developing a cargo vessel powered by wind. IMO’s guidelines are aggressive, but they leave the means to a solution open-ended. That makes wind-powered ships an option.

Besides other solutions like fuel-efficient engines or alternative fuels, Neoline has struck on the idea of re-imagining sailboats to transport cargo.

Neoline is a French company started by former Merchant Naval officers. Their charter is to find a better way to ship cargo in a sustainable way. In particular, Neoline’s mission is to find a way to propel cargo ships in a way that reduces carbon emissions.

At present, Neoline is on its way to delivering its first wind-powered vessel in 2023 and a second one in 2024. The ship is being designed to carry a variety of cargo from liquor, to auto tires, and leisure boats and more.

Here are Neoliner’s dimensions:

  • 136 meters long
  • 4,200 square meters of sails
  • 280 TEU
  • 500 Cars

Plus, the Neoliner, as a Roll-on Roll-off (Ro-Ro) ship has two ramps. These dual fore and aft ramps facilitate loading/unloading.

 

Far-fetched or Commercially-viable Innovation

At first blush, using sailboats to transport cargo seems doubtful. After all we’ve had the Industrial Revolution. Now we’re in the Information Age, which offers sophisticated technologies almost daily. You might ask whether wind-powered solution is a step forward or backward.

The first question to ask is whether the use of sailboats to transport cargo makes sense?

There’s more to this answer than meets the eye. Let’s look at some facts to answer that question.

 

Advantages of Wind-powered Ships 

First, the IMO 2050 mandate has unleashed all manner of research and development for sustainable solutions. Now, research into wind-power appears to be a viable alternative. A wind-powered cargo ship like the Neeoliner can reduce carbon emissions by 90%. That’s not insignificant and makes wind-power a contender.

Second, many companies are under pressure by the corporate social responsibility movement (CSR). That’s aside from what governments may do. CSR’s goal is to promote alternative energy over fossil fuels.

CSR is becoming more powerful as it targets companies as well as banks investing in fossil fuels. Interestingly, India’s government has adopted and mandated CSR into law. All in all, CSR will give a wind-powered solution a boost by pressuring stakeholders to adopt a viable solution sooner rather than later.

Third, shipping cargo via a wind-powered ship is cost-efficient. It offers stability in operating costs by avoiding fluctuating fuel prices. The Neoliner also avoids the penalties of IMO 2050, since it’s a solution that meets the IMO’s goals.

Fourth, the Neoliner can offer reduced shipping rates. With reduced operating costs, that may stimulate the popularity of wind-powered shipping. This should also help reduce future procurement costs, as wind-powered ship production becomes more cost-efficient.

Fifth, the Neoliner may offer some capacity relief. As production of wind-powered ships increases with increased adoption, they may add capacity for shipping cargo. Although not a certainty, there’s a potential to offset the squeeze on cargo capacity.

Disadvantages of Wind-powered Ships 

Wind-powered ships have many advantages, but there is one disadvantage: extended shipping time. Currently, the Neoliner is being built for trans-Atlantic shipping.

Shipping time between the U.S. and Europe is approximately ten days. That compares to six to eight days for a typical cargo ship, depending on the speed. That comes to twenty-seven to forty-five percent slower.

Although, wind-powered ships may be slower, you can mitigate longer transit times by shipping cargo that’s not time-sensitive. You can further mitigate long shipping time by advance planning and diligent scheduling.

Another disadvantage is that the production of the Neoliner will take time to reach critical mass. But that’s true of any innovation. Looking at this more closely, this is only a temporary drawback. As demand for wind-powered vessels increases production and costs will decline, mitigating this drawback.

So, while not an immediate solution, wind-powered ships are gaining in popularity. Many companies have already contracted with Neoline, and its client list is growing.

Here’s a sample list of current and prospective clients:

  • Renault
  • Michelien
  • Jas Hennessy & Company
  • Manitou Group
  • Group Beneteau

Each of these companies sees the Neoliner as a viable solution to IMO 2050. They see this as a way to reduce their carbon footprint and shipping costs. Michelien, for example, hopes to reduce its carbon emissions 15 percent by 2030.

So it’s not a stretch to say that wind-power has a future in international cargo shipping. It may represent a niche in the near and mid-term. But wind-powered shipping appears promising in the long-term.

As wind-power demonstrates its economic viability, production will likely increase. That may also lead to the production of even larger vessels as demand increases.

Wind-powered ships offer many advantages. Depending on your needs, the benefits may offset the downside of longer transit time. That said, it’s fair to conclude wind-powered ships offer a viable shipping alternative.

 

Reducing Carbon Emissions with Wind-powered Cargo Ships  

Innovation has always been a part of logistics. We saw that with the creation of sailing ships in 3400 BC. And innovation by its nature is dynamic. That is, it disrupts the status quo.

Today, innovation is playing a leading role in achieving regulatory compliance. Specifically, stakeholders see innovation as a means to reducing shipping’s carbon footprint.

As logistics becomes more complex, it tends to breed uncertainty. Uncertainty breeds anxiety, but it also breeds opportunity. This is where a 3PL like American Global Logistics can help.

We’re a 3PL dedicated to our clients’ success. We ensure that by keeping a watchful eye on innovations in the logistics industry. We’re in tune with today’s best practices, but we’re also on top of tomorrow’s innovations.

We’re always looking for unique solutions to practical problems. Think capacity constraints and high fuel shipping costs.

Contact us today to see how we can help guide you through the maze of shipping challenges. Let’s work together to make the obstacles facing shipping a thing of the past.

Resilience and Customer-centric Supply Chains: Why You Can’t Have One Without the Other

Publication of articles, ads, etc., about “customer-centric” supply chains seems to be growing. Is that an accident? Is it marketing? Or is it a sign of a new trend?

At American Global Logistics  we believe “customer-centric” supply chains represent the future. In other words, customer-centric supply chains are not only coming, but they’re here to stay. And they will transform supply chain management at its core.

In today’s world, resilience is the dominant planning factor. It has displaced Just-in-Time efficiency. Being able to respond to and rebound from crises is now a critical factor.

It’s becoming a driver of logistics planning with the customer at the center of your planning. A growing body of evidence shows placing the customer at the center of planning is the optimal way to achieve resilience.

In this blog post we’ll delve into why this trend is gaining traction and what that means for your business.

 

The New World of Persistent Supply Chain Disruptions

A number of disruptions (natural disasters, pandemics, etc.) have affected supply chains of late. And they have become more frequent and more damaging. So, supply chains must adapt to keep supply lines open and running.

That means today’s supply chains must be resilient to survive. Without it, your business will wither. With it, you’ll gain a competitive edge. For example, businesses that can snap back from disruptions outperform their competitors. And that results in gained sales, revenues, and market share.

Until a few years ago, the emphasis was on lean enterprise, e.g., Just-in-Time (JIT) logistics support. In today’s post-pandemic marketplace, resilience has replaced lean and JIT. That’s not to say lean and JIT don’t provide any value. They do. But the emphasis has shifted.

To explain the shift, we’ll drill down into their causes.

 

Covid-19 and The Rise of Ecommerce 

With the experience of the pandemic fresh in our minds, let’s review a few of the disruptions caused by Covid-19.

Drastic Workplace Adjustments. The rapid and massive spread of Covid-19 led to many workplace changes. These changes were necessary to keep cargo moving from Point A to Point B. They were also necessary for the safety and well being of workers on the frontlines.

First, businesses began to put social distancing into practice. This was government-mandated, but more important, businesses implemented it out of sheer necessity. Keeping workers safe and healthy arguably became the top priority. Without people, supply chains would have ground to a halt.

Next, businesses began looking at implementing remote work – working from home. Indeed, s some IT companies have decided to continue remote work permanently. The nature of their business, unlike logistics, allows them to do that.

Nonetheless, other companies implemented remote work where it made sense. Support functions lend themselves to working remotely. But working on the frontlines in warehousing, transportation, and maintenance do not.

So support staffs and frontline logistics personnel had to learn to work together under these new conditions. Instead of working together in physical units, workers had to work separated from one another. Some worked remotely and others worked on the frontlines. Some companies excelled at this, while others struggled.

Frontline personnel also had to adapt their workplaces and practices. They had to sanitize their work areas while keeping work areas sanitized. That is, they had to take time to prep their workplaces before, during and after work. That remains tedious and time-consuming, detracting from productivity.

Some had to wear personal protective equipment, depending on the job they performed. That included the wearing of masks, gloves, and coveralls, to name a few.

All together these workplace changes required adaptation of existing processes and procedures. These changes slowed operations down. They made work more difficult. They adversely affected the delivery of timely and seamless logistics support. And they added cost.

Combined, these factors negatively affect customer service and support.

Supply and Demand Imbalances.  As the pandemic spread, factories and retail stores shut down. The movement of supplies slowed and then halted. This threw supply and demand out of balance worldwide.

Also, customer demand became skewed as consumers panicked about the availability of toilet paper, masks, gloves and basic cleaning supplies. The upshot was empty store shelves unlike we ever seen.

Consumers’ fits and starts contributed to the “Bullwhip Effect” in supply chains. Downstream processes severely impacted upstream processes. Forecasting became impossible. This contributed to inventory build-up upstream. That affected quality and led to other inefficiencies, all impacting the consumer.

As the recovery set in, capacity constraints manifested themselves. This further affected the free flow of supplies and merchandise.

The effects of the pandemic accelerated certain trends, such as Ecommerce. Let’s look at how Ecommerce is changing supply chains.

 

Ecommerce: The Major Driver Triggering Realignment

We’ve written a little about the emerging Ecommerce trend. For example, Ecommerce was gaining in popularity before the pandemic. But the pandemic has accelerated that trend. As this trend continues to accelerate, you need to know what that means to your business.

The Need for Speed. You could say there was always a need for speed. Of course that’s true,  but now it’s even more critical. That’s because consumers’ expectations have risen, as they’ve seen what technology can do. Technology, for example, now makes speedy delivery the art of the possible.

The Demand for Reduced Pricing. Ecommerce reduces prices and consumers understand that. Ecommerce cuts out the middleman and that saves costs. Amazon has shown us that. Online business beats offline business on cost – plain and simple.

So, the trend for reduced pricing is increasing. More and more consumers are shopping online. And that’s putting downward pressure on prices at brick-and mortar stores. The demand for reduced pricing is persistent.

The Relentless Rise of Customer Expectations. Along with the two criteria above, customer expectations were rising before the pandemic. But since the pandemic, this trend has accelerated as well.

Besides speed and low prices, consumers are demanding customized products and services. Customization, like speed, is not within the realm of the possible, thanks to technology. Consumers are no longer satisfied with standardized products and services.

Finally, pandemic or no pandemic, consumers demanded friendly customer service. Consumers expected companies to find alternative solutions to disruptions upsetting their daily lives. Thus, friendly customer service means having consumer-oriented policies. Namely, businesses must make it easy to buy and return orders.

As disruptions persist, Ecommerce will hasten the shift from lean/JIT supply chains. Resilience informed by customer-focused supply chains will dominate how business gets done.

 

The Inevitable Rise of Resilient and Customer-centric Supply Chains 

Planning to achieve resilience begins with the customer. It only makes sense. Logistics exists to serve the customer, not the other way around. Logistics is an enabler – albeit an important and necessary enabler.

It’s all about ensuring all support processes operate like clockwork. Logistics comprises an intricate network of operational and financial communication flows. When you focus those communications flows on customers, you will unavoidably create a resilient enterprise.

Do you have a customer-centric supply chain? If not, are you wondering how to get started? Do you know where to begin, or maybe you’re stuck?

Whether you want to start transforming your supply chain or kick-start it, why not contact American Global Logistics ! We can help you in developing a resilient supply chain.

Contact us today to help you create a resilient chain that adds value for your customers. We deliver solutions, savings, and performance by focusing on the customer.

 

 

Survival of the Fittest: Why shippers must build resilience into their supply chains without delay

Survival of the Fittest” has greater meaning for the logistics industry than ever before.

Charles Darwin stated, “It is not the strongest of the species that survives, not the most intelligent, but the one most responsive to change.”

The post-pandemic marketplace is rife with change. Marketplace conditions have changed dramatically. The logistics industry is at a tipping point.

We’re witnessing an unprecedented number of changes impacting supply chains. And these changes impacting supply chains are unrelenting. Unlike the recent past, increasing volatility and uncertainty have become the norm.

At best, shippers that don’t build resilience into their supply chains will struggle. At worst, failing to adapt may result in extinction.

To survive in this new environment, shippers must respond to those changes. And they must respond quickly, effectively and efficiently. To do that, shippers must understand the main drivers of change.

Thus, this post will discuss three pivotal drivers of change shippers must address.

 

Driver #1.  Unending Uncertainty: It all starts with uncertainty. No one has a crystal ball – although that would help in anticipating and responding to changes. If you don’t know what to expect, it’s hard to plan for it. More to the point, if you don’t know what’s coming at you, building resilience into your supply chain is difficult.

Building resilience into your supply chain is imperative because uncertainty has increased. In the post-pandemic marketplace, we see no end to change. That’s important because change can sabotage your operations. It can damage your brand. It can result in lost market share and revenues. Finally, it can put you out of business.

But when you accept change as the status quo, you can redesign you supply chain for resilience. That will enable you deal with change as a matter of course. it will allow you to compete rather than struggle.

Building resilience into your supply chain, will enhance your responsiveness to change.

 

Driver #2. Growing Complexity.  Covid-19 laid the complexity and weaknesses of supply chains bare. And we’re still dealing with many of those complexities now.

Again, supply chains are complex. They typically have many suppliers and customers. Suppliers and customers are located in various geographical areas. Some are local. Some are regional. Some are national. And some are international. Complexity arises from connecting these disparate stakeholders.

With trade wars and the prospect of changes coming from a new administration, relocation of suppliers will add more complexity. And that may impact your customer base as well if a tariff regime favors one country or another.

Another layer of complexity lies in communication. Executing seamless logistics support relies on a communications. Those communications must be seamless. To be seamless, they must be networked. However, some shippers use outdated systems that were great when they implemented. But over time the pace of technological change has rendered these systems obsolete.

Complicating matters, many shippers use disparate, non-integrated systems. As a result, systems are stove-piped. They reflect the needs and available technology at the time.

In either case, existing IT systems and infrastructure confuses and complicates communications.

Without connected networks including all your stakeholders, you can’t respond proactively to change. If you can’t do that, you can’t compete.

 

Driver #3.  Increasing Competition.  As everyone strives to reset after the pandemic, competition is heating up.  Perhaps, the biggest driver of increasing competition comes from rising customer expectations. We see that with the move to E-Commerce.

Customers want their goods… and they want them now. And don’t forget, they expect free shipping as well. That by itself has ratcheted up competition. And that trend isn’t slowing down.

To put this into perspective, customers are demanding added value. They value speed.  They value availability. And they value low prices. Companies that can deliver on these stringent expectations will thrive. Think Amazon.

As companies make customers the center of their operations, competition will increase. Customer-centric business is the new paradigm. Already headed in that direction, the pandemic hastened this trend.

Building a resilient supply chain means being responsive to customers’ needs. Shippers will thrive when they position themselves to respond to customers’ needs.

Shippers that fail to respond to their needs will feel the heat of the competition.

Are You Ready to Adapt to Survive and Compete?

To survive to compete tomorrow, supply chains must embrace uncertainty, complexity and competition. Shippers who anticipate and embrace change will likely thrive. That’s because they will respond proactively rather than reacting reflexively.

On the contrary, shippers that fail to plan for change, handicap themselves. That invites greater competition leading to loss of market share and revenues. It’s a no-win proposition given the rate and scale of change in today’s marketplace.

Addressing these three drivers of change requires sustained focus and direction. It means, as a shipper, you must devote a fair amount of attention to change. Also, you must decide on the direction to take in building resilience into your supply chain.

Are you swamped? Or maybe you’re unsure of how to navigate the changes impacting your supply chain?

If so, you should contact American Global Logistics for help.

At American Global Logistics, we take a fresh approach to change. We provide solutions tailor-made for today’s increasing uncertainty, complexity, and competition.

Contact us today to find out how we can work together to build resilience into your supply chain.

 

Outsourcing Logistics to Compete in a Post-pandemic Marketplace

To remain competitive, shippers need to be on the cusp of changes ushered in by Covid-19. One trend at or near a tipping point is the transactional business model.

Covid-19’s disruptions have brought many changes to global supply chains. Many changes were in progress. More important, many of those changes have accelerated. And they’re resulting in new and lasting ways of executing supply chain management.

As shippers plan for 2021, now would be an opportune time to relook old ways of doing business. Times have changed. How you as a shipper outsource your logistics services can impact your success.

In exploring this issue, we’ll dive into: (1) the need for outsourcing; (2) the new approach vs. the transactional approach; and (3) the selection criteria for choosing the right 3PL.

 

The Need for Outsourcing

As a shipper, you must first determine whether you want to keep logistics in house or not. If it’s a core competency, by all means, keep it in house. If logistics isn’t a core competency, you should consider outsourcing to a third party logistics provider (3PL).

A 3PL is a company whose core competency is providing logistics services. It’s what they do – day-in, day-out. Working exclusively on providing logistics services comes with advantages.

Some advantages are keeping current with change. As we know, supply chain management is rife with change. It characterizes our business. As a result, 3PLs are well-suited to deal with changes wrought by Covid-19.

Leading edge 3PLs also know a thing or two about resilience. They know a thing or two about innovation. And they know a thing or two about technology.

More important, 3PLs understand what makes supply chains function on a deeper level. They understand the disruptive effects of bottle necks. They understand how the bull whip effect can jolt your supply chain. They understand how capacity shortages and high shipping costs can undermine your competitiveness.

3PLs also are more likely to find innovative solutions to supply chain problems. In today’s uncertain times, you need greater predictability to compete locally as well as globally.

The pandemic, however, has turned the old ways of doing business upside down and inside out. So, you must find new ways of doing business to survive in a more complex and competitive marketplace.

 

The New Approach

As already mentioned, we are at a tipping point between transactional- and partnership-based business models. The former represents the old way of doing business. The latter represents the new way of doing business.

Transactional-based business models for providing logistics support worked fine in the past. But even before Covid-19, the usefulness of transactional-based business models appeared to have peaked.

In the past, logistics services were treated as commodities. Contracts stipulated service level agreements that were explicit in both the means and the outcomes of providing those services.

That resulted in the commoditization of logistics services. As such, it stifled or disincentivized innovation. And in drafting contracts this way logistics services became commodities. That rewarded the lowest bidder, as prices became the lowest common denominator.

Long-term partnership-based models, meanwhile, prioritize value over price. They incentivized

outcome-based results and shared values. Those two criteria represent a shift in thinking about logistics services as commodities. Again, this shift was underway before Covid-19 but has now accelerated.

Long-term partnerships value long-term relationships where shipper and 3PL seek the same outcomes with shared values. The new way emphasizes working together collaboratively in unison instead of against one another. Consequently, closer relationships provide benefits not possible in a transactional relationship.

In short, long-term relationships help foster shared risk and shared reward. It gives meaning to “Win-Win”.

 

The Selection Criteria For Choosing The Right 3PL

Writing contracts that embody a “Win-Win” premise might seem easy enough. But before you can do that you have to find the right 3PL with which to enter into a long-term relationship.

For starters, you should seek a 3PL that also seeks and values long-terms partnerships. 3PLs that ae willing to share risks and rewards equitably fit the bill. Beyond that you should seek 3PLs that are customer-centric.

How exactly do you find a customer-centric 3PL?

You should find a 3PL that puts your needs first. In practice, 3PLs that align their goals with your goals put you first. Plain and simple. Doing this enables 3PLs to focus on your needs and challenges. That ensures that relevant solutions will be found in accordance with your priorities.

And customer-centric 3PLs put the customer first in everything – not just in word but also in deed. 3PLs who put their customers first also practice open communication, internally and externally. They realize value lies in sharing data and information, not in hoarding it.

Finally, long-term partnerships foster closer relationships not possible in a transactional-based environment. More to the point, it enables innovation. That can only come from deeper insights gained from the close relationship. Again, this isn’t possible in a transactional-based relationship.

Formerly unrealized value comes from hidden insights. And that leads to relevant and innovative solutions. Greater value ensues as your goals become the focus rather than price.

It represents a vision for the long game.

Preparing for 2021 with a Long-term Partnership

Are you ready to complete in the post-pandemic marketplace?

The New Normal is here, whether we know it or not. By that I mean the future of logistics has arrived. And it arrived sooner than anticipated due to the pandemic.

Conducting business as you did before the pandemic reflects the old way of business. New times require new ways of doing business. Today, we are at a tipping point for the delivery of logistics services.

The transactional (old) model is giving way to the partnership (new) model. The new way focuses on outcomes and shared values. It fosters improved communication and collaboration. That, in turn, leads to innovation not possible when logistics services were viewed as commodities.

With accelerated and lasting change underway, now is the time to get a leg up on the competition.

At American Global Logistics, we put “service” – our watchword – into action.

Why not contact American Global Logistics today. Let’s start the conversation about how you can leverage our services.

With a long-term partnership, we’ll help you gain competitive advantage in the post-pandemic marketplace.

 

Four Reasons Long-Term Partnerships Are Superior to Transactional Relationships

Long-term partnerships aren’t new. But the value they deliver is more pronounced than ever.

As supply chain management has evolved, the need for long-term partnerships has grown. The increase in complexity, the increase in competition, the increase in teaming and the rise of pivotal trends are reshaping logistics. All together they’re creating a more challenging landscape.

The way forward into 2021 calls for customer-oriented, agile, and resilient supply chains. As with anything, there’s no panacea. However, to survive and thrive, long-term partnerships are proving to be indispensable.

Let’s look at the four reasons long-term partnerships will shape the future of supply chains.

 

#1 Increasing Complexity.  Let’s face it, doing business in today’s marketplace is loaded with complexity. That goes double for supply chain management. For example, organizational structures are changing. They’re getting flatter, especially as remote work becomes common- place.

To enable these changes, we rely on technology. Even though there’s a drive towards user-friendliness, technology is increasing complexity. As supply chain support gets closer to the customer, the level of granular detail required increases. That by itself increases complexity. One of the complexities deals with integrating stove-piped systems across organizations.

Besides technology, businesses need data to drive their processes. Greater customer focus requires new sets of data to support business process improvement. And implementing new business processes enabled by new data sets calls for active management.

Data show us Ecommerce is one trend that’s accelerating. And it promises to change business. Underlying this trend is the demand for customization by consumers. That calls for greater specialization in the delivery of services. And that invites greater complexity.

Yet, businesses are becoming more responsive, as they attune themselves to their customers’ needs. Even as managers begin to master complexity, competition will unavoidably increase.

 

#2 Increasing Competition.  Besides taming rising complexity, competition will heat up due to wild market swings. For example, as markets get buffeted by changes. in U.S. leadership and the attendant policy changes, businesses must position themselves to leverage change. This reset will increase competition. Advantage will go to those who adapt most quickly.

Innovative solutions represent another area influencing competition. Specifically, technologies that take your business to the next level will be in demand in 2021. Those technologies will focus on visibility, optimization, and analytics.

Businesses that incorporate these solutions sooner rather than later will thrive. They will surpass their competition. Yet innovative solutions aren’t restricted to technology solutions.

Innovative solutions also come from ingenuity. Innovative solutions also result from deep insights into a problem’s root cause. It also stems from looking at existing problems in new ways by taking a fresh perspective.

Both of these result from close working relationships. As you know, close working relationships don’t happen overnight. They’re built over time allowing trust to form.

As trust grows that enables the free-flow of information. That, in turn, enables greater insights into identifying root causes. With root causes identified, 3PLs can craft relevant, effective and efficient solutions. That eliminates waste and sharpens performance.

In short, competitiveness will heat up in already competitive marketplace. Learning from 2020, we know that businesses working together can compete more easily.

 

#3  The Growth of Teaming.  Going it alone is no longer a recommended strategy for success. As the New Normal takes shape, teaming is growing out of necessity. It’s no secret that there’s strength in numbers. When shippers and 3PLs team together they can benefit in many ways.

One way they can benefit is through improved communication and enhanced trust. Both lead to synergies that elude companies with transactional relationships.

As relationships develop, organizations become more proactive and engage in smarter risk-taking. Closer relationships also motivate employees to find meaningful solutions. An example of that is finding ways to protect space and shipping rates. That resonates with shippers who see adverse business conditions growing with no end in sight.

As complexity and competition increase, long-term partnerships are a simple, yet effective antidote. But that’s not all.

Other trends have emerged that promise to further promote teaming and the New Normal.

 

#4 Recent Pivotal Trends.  Recently, pivotal trends have emerged that will influence supply chains as we know them. I’m talking about agility, resilience, and customization. It appears all three will leave an indelible mark on supply chain management. They’re all combining to shape what we now call the New Normal.

They will have lasting effects because supply chain imperatives have changed. Agility and resilience allow supply chains respond and rebound at the speed customers demand. Now that customers demand customization, the days of mass production, as we knew it, are over.

These three trends were evident and growing before Covid-19. But after the pandemic, we’ve seen these trends accelerate tangibly. For example, Ecommerce sales increased 15% between 2015 and 2019. Then in 2020 with the impetus of Covid-19, growth spiked to 25%.

Furthermore, a report by Kearney, (Anand, Bahulkar, and Husain) projected that Ecommerce penetration of the retail market will reach 40%. That will further tighten already constrained capacity. And that will put upward pressure on shipping prices.

There’s no mistaking that these trends will continue to grow. Some of them have reached critical mass. Those that have will cause enduring changes to supply chains.

As these trends converge, the case for long-term partnerships is inevitable. More important, long-term partnerships will enhance competitive advantage. So, long-term partnerships are not only necessary, but they also make competing in a severely competitive market simpler and easier.

 

Taming the New Normal with Long-term Partnerships

Transactional relationships represent the old way of doing business. Long-term partnerships represent the new way. It’s the way to the future.

Complexity, competition, teaming, and recent pivotal trends all impinge on the delivery of seamless supply chain operations. Furthermore, long-term partnerships between shippers and 3PLs will set them apart from their competition.

That is, shippers and 3PLs who seek a long-term partnership will gain a competitive advantage. Uncertainty will persist, but you can overcome it with a long-term relationship with a 3PL.

The time to get on board this trend is now. If you’re serious about competing in today’s changing marketplace, look no further than American Global Logistics.

We don’t pursue transactional relationships. We seek relationships with companies who take the long view.

Contact us today to find out more about the benefits of working with us for the long-term.

 

 

Dealing with Covid-19’s Enduring Effects on Supply Chains in 2021

Covid-19 is casting a long shadow on supply chains at the start of the new year.

In the pandemic’s aftermath, businesses need to prepare for what follows. This year we expect to see a year of adjustment. Stated otherwise, 2021 will likely be a year of resilience and stabilization.

It only makes sense that after last year’s turmoil, business leaders and supply chain professionals take proactive steps to avoid continued disruptions from last year.

This post will discuss two major disruptions affecting supply chains today.

Now, let’s dive into those issues. Let’s start with the issue that may have the largest impact: A Second Wave.

 

The Threat of a Second Wave

A return of Covid-19 has struck and has returned with a more virulent strain. And with it comes more uncertainty. Several vaccines are out, but no one is sure whether the recently developed vaccines are effective against this second wave.

Here’s the backdrop setting the stage for future disruptions.

First, the second Covid-19 strain is making its way around the world. Second, China is shutting down major cities bringing back visions of last year’s drastic quarantines. Third, the U.S has multiple reported cases of the new, more virulent strain.

More alarming, is that the spread of this new strain has hit the ports of LA and Long Beach hard. Infection rates at these ports is higher than state and national averages. As of January 17, 2021, 694 dock workers tested positive.

Moreover, 1,080 union workers have been exposed to personnel with the virus. With infection rates exceeding state and national averages, there’s talk of ports closures.

Keeping these ports open is critical to the economy. There’s no question about that. So you can expect authorities to do whatever it takes to keep them open. That said, the likelihood of a partial or total shutdown is unlikely. At least, that’s the public message.

The pending roll out the vaccine may warrant this optimism. But dock workers must get a higher priority for receiving the vaccine. Otherwise, ruling out partial closures may prove too optimistic.

Shutting down the ports, partially or completely, would reverberate through supply chains with damaging effects. Hence, planning for a “doomsday scenario”, as it’s called, is not far-fetched.

 

Continuing Capacity Constraints

With the “doomsday scenario” out of the way, let’s focus on something more mundane. Capacity constraints. That became an issue last year, and it’s carrying over into 2021.

Tight capacity is the crisis du jour. It’s tough to resolve given the dynamics at work. Supply built up as officials put quarantines in place. And we saw the release of pent-up demand, as economies opened-up. That resulted in a big mismatch between supply and demand, that’s still playing out.

So, constrained capacity remains a lingering issue disrupting supply chains.

To mitigate capacity shortages, businesses resorted to alternative means of moving freight. Omnichannel supply chains cropped up, and retailers began using their stores as distribution centers.

Also, Less-than-Truckload (LTL) became a go-to source for relieving capacity constraints. Air freight also saw an in increase in shipping cargo. So did rail.

Taking a multi-modal approach helped to a degree. However, now supply chains must prepare for the massive distribution of vaccines. This distribution will have secondary and tertiary effects.

First, we have the use of capacity to distribute vaccines. Next, we have the distribution of associated equipment and supplies.

Both will place more demands on already constrained capacity. They will further constrain tight capacity displacing shipment of non-vaccine cargo by other means.

Shipping capacity will remain tight and will have attendant consequences. Increased shipping costs is one of them. We can expect additional challenges to both performance and cost.

The time to begin exploring workable alternatives is now.

 

Are You Prepared for 2021?

We know that some issues caused by Covid-19 last year will carry over into 2021. We also know a lack of appreciation of Coivd-19’s enduring effects can disrupt supply chains.

Nonetheless, based on lessons learned, from the pandemic, we shouldn’t see volatile disruptions. Still, challenges will remain.

Businesses that anticipate and prepare for pandemic-related disruptions, will outperform those that don’t. That seems obvious. But many businesses will let their preoccupation with daily issues consume them.

One big issue impacting a return to stable operations is Covid-19’s Second Wave. We’re witnessing that now at LA/LB, as infection rates continue to climb.

Yet, port officials remain confident the “doomsday scenario” – shutting ports down – won’t occur.

Is this wishful thinking or not?

Regardless, businesses and 3PLs must remain vigilant. They must be aware of Covid-19’s enduring adverse effects. That includes the full spectrum – from the likely to less likely – in planning for 2021. The roll-out of the vaccine and capacity constraints are just the headline issues.

You can plan independently. Or you can plan with a trusted 3PL partner like American Global Logistics.  We have a broad range of skills, capabilities, and services. We have a strong team supported by understanding leadership.

If you need help in preventing, avoiding and/or mitigating supply chain disruptions, contact us today. We’d like to hear from you.

Contact us to find out about partnering with us as you plan for 2021.

And… keep reading our weekly posts. We cover relevant issues affecting your supply chain. We do that to help you stay ahead of disruptive change in our constantly changing business.

January Sets the Stage for 2021: Supply Chain Disruptions Continue

January 2021 has started the year full of challenges. These challenges will likely create uncertainty that will shape the rest of the year. We probably won’t experience the staggering disruptions of 2020. Yet, we can expect 2020’s residual disruptions to affect all aspects of logistics.

We are already seeing rising costs of fuel and shipping. We’re also seeing a rise in delays of cargo worldwide coupled with a rise in refused bookings. As a result, we’re seeing a rise in innovation, optimization, and regulation.

Rising Costs. The beginning of the year has ushered in what appears to be a trend of rising costs. The cost of oil and shipping are increasing. We also see surcharges or space premium surcharges (SPCs) in trans-pacific shipping rates. JOC.com reports that Asian importers are paying up to 50% more than rates in the spot market. The cause for these sky-high costs is the high demand and short supply of vessels and equipment.

Rates in January for Asia-North America are approximately $4,000 per FEU to the West Coast. East Coast rates  are expectedly higher at $5,000 per FEU. When you apply SPCs for capacity and equipment, the cost rises to about $6,000. If that’s not astonishing on its own, consider this. SPCs that typically guarantee space (and equipment) now are not always honored. With space being scarce, a relief in costs before China’s Lunar New Year is unlikely.

Air cargo rates are also rising due to global demand and a shortage of capacity. Average rates for Shanghai-North America in early January were $8.34 per kg. The last time rates were that high was in May 2020, when Covid-19’s effects peaked. Putting that into perspective, compared to 2019, today’s rates are 157 percent higher. (Source: JOC.com)

Rise in Cargo Delays.  As shipping prices increase in Europe, EU shippers are delaying imports for Asia to sidestep these increases. Rates currently are $4,298 per TEU. Today the Shanghai Containerized Freight Index is three times higher than the rates in 2020 for the same period. And rates are four times higher than October 2020’s spot rate. (Source: JOC.com)

The effect of delaying shipments is a growing backup of containers at Chinese ports. This further exacerbates the already tight capacity shortage. As a result, competition for space among freight forwarders is heating up. For example, weekly rates per FEU are reaching incredible levels between $13,000 and $16,000.

Increasing rates will only intensify the rising trend of delayed cargo, creating more uncertainty.

Rise of Refused Bookings. As the effects of the pandemic subsided, we saw pent-up demand pop. Westbound trade is increasing, increasing demand for ships and containers. Also, carriers are compounding this problem by refusing bookings for eastbound trade.

Carriers have refused bookings, so they can ship empty containers to Asia. In many cases, carriers are doing this so they can stock containers with higher paid cargo. This has led the US Federal Maritime Commission to step in and warn carriers to stop this practice. It not only disadvantages U.S. exporters but also leads to greater trade imbalances.

Rise of Innovation and Optimization. Combatting the continued turmoil caused by post-Covid, appears to be an emerging trend. With so many unknowns a reversion to normal operations is unclear.

Thus, we’re beginning to see a rise in innovation and an emphasis on optimization. New conditions demand new solutions. Old ways of doing business won’t work in this increasingly competitive environment.

In particular, capacity shortages seem to be driving innovation and optimization now. Companies are looking for alternative ways to move freight and LCLs is one of them. LCL shipments offer flexibility as well as speed.

Greater use of LCLs can ease the pressure on limited capacity. Moving freight reflects one obvious use of LCLs.  Another is the movement of empty containers. Hence, LCLs represent a new strategic asset.

In addition, optimization is also emerging a trend. As competition heats up, businesses are looking for smarter ways to do business. Rising customer expectations and pressures to cut costs further spurs the drive for optimization.

Technology for technology’s sake is a thing of the past. Instead, technology development will likely focus on extracting greater efficiencies. Several areas offer potential savings in time and money.

First, we have more efficient routing. Next comes improved crew communications and training. Third, we have the development of solutions to deal with the effects of regulation. That includes development of biofuels and vessels that burn VLSFOs.

 

The Year of Resilience and Stabilization

Last year’s disruptions to supply chains was a year for the history books. Wracked by Covid-19, supply chain reacted, morphed, and adapted. And many transformed more quickly than expected. Surprisingly, many businesses recovered, making resilience more than a buzzword.

The new year, on  the other hand, will likely shape up to be a year of resilience and stabilization. The logistics industry’s stakeholders, like you, must continue to adapt to thrive. Refining business processes and developing new technologies will consume your time.

Shippers must operate more effectively and efficiently than ever before. Pressures to build agile and resilient supply chains will dominate 2021.

It’s how you will differentiate your business from your competitors. And that will require greater innovation and optimization.

At American Global Logistics , we’ll work closely with you to help you achieve stability and growth.

Contact us to today to find out more about partnering with us.