Halfway through 2019, ocean shipping costs have already inched up for businesses, with many carriers locking in rates $200 to $300 higher per TEU than the 2018 contract season. While those rate increases have left businesses less than thrilled, they could actually benefit organizations as the season ramps up by stabilizing schedules and reducing blank sailings that wreak havoc on shipping schedules.
The question of how much shipping will actually ramp up is still unanswered, however. Imports have leveled off compared with last year as businesses rein in restocking, while a number of factors could prompt demand and rates to rise or fall in the coming months:
- Ongoing tariffs: After last year’s huge spike in shipping to beat impending U.S.-Chinese tariffs, some businesses are taking a conservative approach to shipping to avoid additional increases.
- Reshoring: With many businesses moving operations to Malaysia or Vietnam, Chinese import volumes have dropped 5% – and rates could be the next to follow.
- Fuel sulphur cap: Vessels are already coming out of service to prepare for the International Maritime Organization’s 2020 rule capping fuel sulphur levels. Depending on how import levels play out this summer and fall, those capacity cutbacks could boost spot rates.
3 ways to prepare for the peak
For businesses with large global supply chains, preparing for uncertainty all year round is essential – and particularly important during the busy peak season. Combining the right tools, people and processes can help organizations navigate fast-changing conditions, operate more efficiently and ensure they’re meeting customer expectations. Here are three areas of focus to keep in mind:
- Gaining end-to-end visibility. Purchase orders are notoriously difficult for businesses to track, creating ripple effects down the supply chain when milestones are missed. By adopting technology that offers insight into each step of the production process, businesses can plan effectively during the busy months and seize opportunities for efficiencies, like opting for a less expensive but longer route when products are ahead of schedule.
- Delivering as promised. If a business books 10 containers but only delivers three, the carrier might not be willing to book 10 again next time. Respecting advance notice polices and forecasting accurately can help businesses build stronger carrier relationships – and avoid having to scramble for more expensive alternatives.
- Make exceptions the rule. Seventy percent of businesses have experienced a supply chain disruption in the past year, and the peak season makes organizations even more vulnerable. When exceptions arise, a centralized technology platform can help businesses identify the issue quickly and make the carrier or mode adjustments needed to keep things running smoothly in the future.