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Freight Capacity Demand Wreaks Havoc For Shipment Delivery

Wondering where your new couch is? Freight capacity demand continues to congest delivery schedules, putting global supply chains in a state of strain today.

What’s covered in this article:

  • Port congestion exacerbating capacity shortage

  • Long shipping times for end customers

  • Effects on furniture shipping

  • Leveraging technology to improve supply chain operations

Global supply chains are in a state of strain today. Economic activity has felt the effects of border closures, capacity demand and industry halts resulting from the COVID-19 pandemic. Consumption channels have shifted as well, transitioning from buying in-store to a higher rate of buying online.

Logistics stakeholders who have expected consumption demand to rise slowly, were caught unprepared for the rapid spike in demand.

This shift has led consumption to skyrocket, yet vital pieces of supply chains including manufacturing and food processing plants have not been working to their total capacity. Logistics networks, too, have had their share of complexities, all thanks to continued social distancing regulations and shrunken workforces. Logistics stakeholders who have expected consumption demand to rise slowly, were caught unprepared for the rapid spike in demand.

Even as demand continued to consistently increase and stay elevated this year, transportation networks have struggled to keep up with their limited freight capacity. This extraordinarily high demand for freight capacity has caused freight prices to increase as well. Ocean freight prices in the China to North America trade lane have increased by roughly 150% in the last year, while the China to North Europe trade lane saw a massive 575% increase in the same period.

Overwhelming Capacity Demand And Port Congestion Increase Cargo Dwell Times

While consumer demand has remained at historically high levels, COVID-19 continues to create new issues. Recently, the port of Yantian, a deep-water port from Shenzhen, China, witnessed a COVID-19 outbreak that prompted city officials to shut down operations partially across the port and quarantine large parts of the city. Despite these efforts, the outbreak continues to rage on, ensuring port operations remain subdued.

As part of the Shenzhen port complex, the Yantian port is home to one of the largest terminals in the world, making this disruption one of global significance. With over 25% of all Chinese exports coming from the adjoining region to Yantian, the US to China trade lane has been majorly impacted.

Image Source: https://www.cnbc.com/2021/06/17/covid-outbreak-satellite-images-show-container-backlog-at-port-of-yantian.html

For one, reduced port operations have meant more congestion in the South China Sea (where the Yantian port is located). Dozens of vessels are waiting for release at the terminal, and thousands of containers are stuck onboard, exacerbating the existing capacity shortage. Port data from the Yantian show that container dwell times have increased from an average of around a day or two to over two weeks now. Increased dwell times would mean slower freight movement, robbing shippers of the chance to offload their cargo and ship new cargo.

The Effects of Port Congestion on Capacity

  1. Increased prices across the supply chain

  2. Slower movement of goods

  3. Shortage of containers

Port congestion is also a familiar sight across all major ports in the US, including the two biggest ports on the West Coast—the Port of Long Beach and the Port of Los Angeles. Port congestion in the San Pedro Bay (home to both the ports) had over 30 vessels anchored off the coast awaiting space at the terminal, all through the first quarter of 2021. While congestion numbers have fallen over the last few months, the Yantian crisis could again create complexities.

Why Does Shipping Take So Long?

The end customers who order products online have often had to endure frustratingly long wait times to receive their shipment. This is a scenario that has worsened over this year as a direct consequence of container scarcity. Take an example of a customer ordering home furniture online. As most of the furniture sold in the US is manufactured in China, companies would have to import their products via ocean freight.

With freight prices surging over the past year and container scarcity ubiquitous, furniture shippers are in for a hard time. As shipment reaches these shippers several weeks behind schedule, the final-mile leg of the supply chain is also inevitably delayed.

Shippers can look to leverage technology to have improved monitoring of their supply chain operations

While circumventing the issue of container scarcity and port congestion is nearly impossible, shippers can look to leverage technology to have improved monitoring of their supply chain operations. Inter-tier visibility is often an issue, as shippers fail to understand the provenance of their products—courtesy, the lack of digitalization and the presence of information silos within organizations.

End customers can be provided with track-and-trace options to help them locate their product. This will provide visibility into unforeseen delays in real time. Services like these can go a long way in helping build brand loyalty, enabling shippers to stay afloat in this dynamically evolving market.

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