Date: Tuesday, July 20, 2021
Source: Sourcing Journal
Port congestion has been a recurring theme throughout the supply chain over the past year, with U.S. ports yet again seeing record cargo imports in May and a Covid-19 outbreak slowing operations at China’s Port of Yantian in June. With constant hiccups and bottlenecks everywhere you turn, accompanied by skyrocketing container costs, the universal question has been: “When will supply chains return to normalcy?”
Two experts in the field expect more of the same throughout 2021 as e-commerce demand remains consistent.
In a recent Sourcing Journal webinar “Off the Rails: Overcoming Logistics Roadblocks,” Dr. Noel Hacegaba, deputy executive director and chief operating officer at the Port of Long Beach, said importers will have to endure the congestion until early next year.
“This will likely continue—maybe not at the same pace—into the first quarter of 2022, maybe with a lull following Chinese New Year,” Hacegaba said. “Demand for containers, vessel services, trucks, rail and virtually every piece of equipment in the supply chain is at an all-time high. You have a scenario where demand is outstripping supply in every single segment in the supply chain, and that’s driving pricing through the roof.”
Vincent Iacopella, executive vice president, growth and strategy at freight forwarder Alba Wheels Up International, said that rumblings out of Asia expect constrained shipping container capacity until at least first quarter of 2022, with no break on price. “If the capacity stays that tight, you don’t get relief on price.”
Four steps to mitigating last-minute mishaps
Iacopella outlined four steps he and the Alba Wheels Up International team have taken to mitigate last-minute struggles associated with overcapacity, delays and higher prices.
Iacopella first recommends that brands regularly give ocean carriers advanced allocations—typically three or four weeks beforehand.
“When you go on the market the same week, that’s when price is generally higher and capacity is very tight,” Iacopella said.
He also recommended flexibility in routing, noting that importers could redirect shipments to the Ports of Oakland and Tacoma instead of Los Angeles or Long Beach.
Additionally, although air freight is more expensive, Iacopella said retailers could ship more inventory via air to relieve some pressure off the overloaded ocean freight.
Iacopella shared his final suggestion based on discussions with partners and customers, more of which are shipping goods in earlier to get ahead of rising rates. In many of these cases, they are shipping goods to warehouses in Mexico through Alba, from where they can then send the product directly to the consumer duty free. This is thanks to Section 321 de minimis, a regulation allowing a company to import goods duty free if they are valued at less than $800.
“If you can bring goods in early, and you have an alternative fulfillment option, whether it be holding in Mexico until you’re ready to cross into the U.S, or whether it’s held in Southern California, that has been effective for those who can do it,” Iacopella said.
Could a 24/7 supply chain be a reality?
The Port of Long Beach’s Hacegaba harped on improving supply chain visibility for future black swan events, pointing to two instances over the pandemic that caught nearly everyone off guard.
In the second and third quarter of 2020, the port saw 40 “blank sailings,” referring to shipments that either skipped over a port of call or were cancelled entirely. Additionally, Hacegaba said that the industry was further stunned by China’s quick manufacturing rebound, resulting in additional cargo “that caught the supply chain completely out of balance.”
Both Hacegaba and Iacopella agreed that terminals and carriers haven’t bought into advanced data-sharing that could help them address these issues together.
“We were surprised during the process of how many stakeholders who are paying customers weren’t receiving the same data,” Hacegaba said.
Beyond the visibility concerns, Hacegaba suggested that stakeholders take a serious look at transitioning to a “24/7 supply chain” to combat overcapacity.
A 24/7 supply chain would require warehouses and distribution centers to expand their hours, but it would relieve upstream congestion, as full containers sit in the terminals for longer than they should, Hacegaba said.
“The warehouses and distribution centers must make sure that there’s ample workers to ensure the capacity to handle shipments,” Hacegaba said. “The Covid safety protocols, social distancing and everything that has been in place since last year has tightened capacity in the warehouses, so there’s an issue there. Also, access to truck drivers continues to be problematic as well.”