1. What’s created this “supply chain perfect storm”?
Bottom line, increased exports have overwhelmed global freight and shipping capacity. Container rates have hit an all-time high of $11,109 in mid-September, after having fallen below $1,500 at the start of the pandemic (Freightos). Drastic labour shortages across the supply chain industry, from freight operations to truck drivers, that existed before the pandemic, are now only worse. Ports are faced with supply bottlenecks due to lack of labour and driver shortages, exacerbated by Covid-19 outbreaks. On September 17, there were a record 147 total vessels in port, at anchor, and in drift areas according to the Marine Exchange of Southern California. In Canada, the port of Vancouver is sending record numbers of empty shipping containers to Asia. As of August 2021 the number of empty containers exported from Vancouver was up 89% from the same period in 2020, which was the previous record-high year for empty-container shipments from the port.
“Even if you don’t procure freight directly from ocean carriers, chances are someone in your supply chain does. It is an issue that we’re addressing daily. While pricing is a huge factor, the lack of available materials and resources is even harder to navigate,” says Riley Brand, President of Jacobs & Thompson Inc. and OG100 member. “We’re working to rebalance our supply chains and broaden our supply base on a daily basis.”
2. When will we see a return to smoother supply chain operations?
Predictions range from early to late 2022, but there are numerous factors at play and short-term inventory shortages are expected over the next few quarters. Based on past experience, container rates should decline when import volumes soften. Some big players have called for government intervention attesting to the essential need for a fluid supply chain. While not everyone agrees with government intervention, it seems to have made some headway. Following consultations with the US transport department, the Los Angeles and Long Beach ports in California will trial extended operations, such as night-time weekend hours and 24-hour operations.
3. What can be done to alleviate the current issues, and the pre-pandemic issues, that led to this?
Carriers and container leasing companies have placed new container orders to help alleviate the situation however, flooding the market with new empty containers will not alleviate all the issues. New and improved labour strategies can be implemented, such as guaranteed compensation, updated benefits packages, and broadening recruiting outside of traditional labor pools. Automation and technology-led platforms at ports, factories and warehouses can help identify and solve problems that affect the flow of goods. What’s certain is that this global issue caused by multiple factors will require action and solutions from a broad range of industries, across global borders.
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