WHAT ARE THE CAUSES FOR THE UNENDING BLOCKAGES IN SUPPLY CHAINS?
Container shipping has never passed through such dramatic and unpredictable times as now. The COVID-19 pandemic took the world by storm last year and the consequential shutdowns of factories and offices continue to have ramifications today. The emergence of new coronavirus variants is adding to the already crippled supply chains, while events like the accidental Suez Canal blockage in March this year by a giant container ship and its consequences point to the fact that the shipping & logistics industry is yet to regain traction.
The supply chain industry drew little scrutiny of the outside world until a series of crises started striking the shipping industry since the beginning of the pandemic. All along, container shipping had kept the supply chains functioning smoothly, leading to unprecedented growth in globalization and satisfied customers. The cost of shipping was reasonable during the pre-pandemic period and containers were available on call. So everyone took the unhindered movement of goods for granted. But none could predict that the buoyant situation would be short-lived.
During the first half of 2020, the global lockdown led to the closure of shops and establishments selling consumer goods, and this caused an imbalance in the forces of supply and demand. To support their business models, the shipping industry curtailed capacity and reduced the number of containers in service. Ironically, the second half of 2020 witnessed an unprecedented demand for containers driven by an extreme shift in consumer behavior. Lockdowns resulted in vastly reduced business and leisure travel, leading to grounded flights the world over. But the economic stimulus measures many governments implemented meant that consumer goods were back in demand, mostly in the western world. Demand for FMCG products, Textiles, Electronics, Personal Protective Equipment (PPE) and Do-It-Yourself Kits increased.
The retail setup in several developed nations is giving way to e-commerce, giving consumers the convenience to shop within the comforts of their homes. A change in the earlier spending patterns such as leisure travel and holidays means that consumers have more money at their disposal, leading to a position where they are spending more time in and around their homes, enjoying recreational activities like gardening and home improvement. Suppliers ship such consumer goods mostly in containers, and as the pandemic struck, there arose an unexpectedly high demand for goods transported in such containers.
Such an unprecedented scenario centered on rising demand for consumer goods, together with reduced vessel capacity and shortage of containers, has led to skyrocketing freight rates. To face the future boldly, it would be necessary to assess the demand and supply dynamics carefully to maintain the cost-effectiveness of the supply chains and ensure a buoyant economy in the times ahead.
For the logistics sector, it has been one of the most challenging times in our recent memory. One would have thought that the shutdown in economic activity would end up in reduced demand for goods. But the reality proved different altogether, for, in fact, the shipping capacity came under increasing strain with mounting freight charges. To illustrate an example, the spot price for sending a 40-foot equivalent unit (FEU) from Shanghai to New York has increased 5 fold from the 2019 rates.
Ports are working to their full capacity, leading to port congestion where vessels cannot get a berth on time. At such times, the logistics provider can suggest alternate routes to avoid long waiting times at ports. Choosing alternative transportation modes would also be worthwhile after considering the urgency of the shipment, its value and dimensions. Pre-booking a time-sensitive cargo helps, because it brings the shipment at its destination on time.
The VS&B Containers group, headquartered in Chennai, gives customers the advantage to get containers from around the globe, thanks to their extensive network of depots and diverse inventory.
VS&B supplies new containers delivered straight from the factory to a buyer’s preferred location. Their 20’ GP new and used containers are now ready for sale in Mumbai, Singapore, Jakarta and Port Klang. Please contact traders@vsnb.com and get your containers on time!
