Tuesday, December 6, 2022

Overcoming This Year’s Shipping Challenges

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The shipping industry has been facing numerous issues for years and was dealt a heavy blow when the COVID-19 pandemic struck.

In 2022, it’s not just general uncertainty that’s problematic; other issues that have been around for much longer are also surfacing.

For example, the frontline worker crisis, which has been around for a long while, has now become evident even to laymen.

The global shipping industry is, well, global. While this is good in terms of coordination, it also means that when there’s a problem on one end, it’s affecting the entire chain.

According to More Than Shipping, a reliable source when it comes to these matters, this year’s prospects look glum.

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At a glance:

  • No new capacities are being introduced to Trans-Pacific trade in the period of 2022-2023;
  • Low schedule reliability is one of the underlying causes of continued congestion in Asia and the U.S. Experts predict that it will lead to 15%-25% of capacity getting pulled out of the market as a result;
  • Port congestion on the U.S. West Coast will likely continue and cause more blank sailings for the West Coast, creating more pressure on the pricing and space for the West Coast;
  • Carriers’ new plans to add capacity to the U.S. East Coast may not be as fruitful, as U.S. Gulf and Florida ports won’t receive any new capacity according to carriers. Many allocations for the U.S. Gulf and Florida are currently being reduced by carriers.

Everything considered, it is likely that the global shipping industry will have to undergo rapid changes in the following years to address all these pressing issues.

It’s likely that charter values will be given precedence over freight rates. However, for this to happen and remain sustainable, oil prices need to stabilize first. At the moment, no one can predict when that may (or will) happen.

Let’s take a look at the imminent issues and see how they can be addressed.

Rising Costs

The rising costs of everything related to the shipping industry are the first obvious issue. Rising costs always lead to higher costs of operation, which, in the end, affect end-user prices. Add to that that presently prices of fuel are not only high but also unpredictable and the situation isn’t likely to settle any time soon.

The reasons mentioned above are negatively affecting market conditions, which are getting poorer by the minute. It is a vicious circle that can’t be addressed overnight.

Security Risks

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Security risks have been present all along, but of late, they’ve been multiplying. It’s never good when too many things are happening all at once; unpredictable shifts are only fueling the insecurity.

Security risks can be a physical threat in some parts of the world — robbery and such. These can be guarded against to an extent. On the other hand, there are cyber attacks to consider. Modern technologies are a double-edged sword: while they have helped to improve shipping operations, they have also invited vulnerabilities, particularly in terms of equipment.

Environmental Challenges

Environmental regulations are another hurdle. While there’s no denying that they are necessary, they also require that shipping companies implement certain technologies that are not cheap.

In addition, these technologies are yet to be polished, which adds to the security risks mentioned above.

Late Shipments 

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Even in the happiest of times, it’s impossible to ensure that all cargo will ship in a timely manner. In fact, it would be unfair to say that late shipments are to be blamed on the present crisis alone.

Shipments are late all the time; it’s just that now it’s become evident. On average, every third container is likely to arrive later than planned.

This issue, at least, can be addressed to an extent. Rather than preventing the issue — which is impossible — focus on addressing the hurdles that can be eliminated. Basically, this means planning and following through.

Here are some ideas:

  • Plan well ahead for busy seasons (holidays and similar)
  • Prioritize time-sensitive shipments
  • Check out which of your carriers have the fewest delays and put focus on them
  • Use digital freight software that can forecast delivery times
  • Set proof of delivery
  • Track your containers’ delivery status digitally so that you can address potential problems in a timely manner

Strengthening the Resilience of Supply Chains

As mentioned above, anything with the prefix “global” causes a chain reaction when an issue emerges. The whole point of going global is to guard against unforeseen conditions, but this logic is also the first to backfire in times of crisis.

Because the focus is on efficiency, one small disruption can affect the entire robust supply chain, let alone major crises.

We saw that happen when COVID-19 hit. Resilience and efficiency simply don’t go hand in hand.

There are some things that can be done, but the issue cannot be solved in a matter of days, especially not with the standing codes and regulations.

What is to be done, then?

There are always some reasonable hacks you may apply. For starters, you can look into alternative carriers. Having multiple carriers — for time-sensitive shipments, at least — ensures that you can swiftly change plans at a moment’s notice when a crisis emerges.

Of course, you can also switch to air freight, but this transportation method can be very expensive and should be used only for the most urgent of shipments and only when all other options have been exhausted.

Another way to strengthen the resilience of supply chains is to use technology to create supply chain visibility, which will enable you to react promptly in times of crisis and find a solution within the supply chain.

However, as mentioned above, modern technologies are not unconditionally reliable and are susceptible to cyber attacks, so don’t skip the first alternative.

Use Digital Procurement Platforms for Increased Visibility

One huge issue (which is by no means new) is the lack of visibility. Naturally, as the supply chains are getting more globalized, there are more things to track (destinations, cargo, ships, etc.). This is another major reason why data tracking is complex and far from perfect. Beyond tier-one suppliers, nothing is certain.

To address this issue, you’ll need to forgo obsolete methodologies (like excel sheets, for example) and turn to digital procurement platforms that are designed to create end-to-end visibility. This means that every step of the shipping process should be visible and, to top it off, these platforms also create visual breakdowns of the current rate sheets.

Key Takeaways

As you can see, the challenges the shipping industry is facing are not exclusively caused by recent years’ crises. Globalization means that once local issues have spread and multiplied as more parties are joining in.

New technologies have their role, but they aren’t nearly as secure or as reliable as we want them to be.

That’s why you should secure traditional methods preemptively: find alternative carriers, prioritize time-sensitive shipments, and plan ahead for busy seasons. Only after all this has been done, use digital freight software that can forecast delivery times and track your shipments digitally.

Over time, some carriers will prove more reliable than others, but with the insecure times we live in, nothing can be 100% sure. On the upside, shipping has never been flawless, so sometimes even the best planning won’t change the outcome. Heads up, and be realistic!

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