What Shipping Crisis?

Posted

Apparently, there is a Global shipping crisis!

We are now more than 18 months into the pandemic, and we have witnessed during this time complete disruption, throughout all industries and to supply chains all around the world.

We have seen shipping routes snarled not just by the pandemic but also by extreme weather, driver shortages and one infamous canal blockage.

We have even seen McDonalds withdraw milkshakes and some bottled drinks from their menu and Nando’s had to close 50 stores due to no chicken!

The impact of Just-In-Time Manufacturing

Most supply-chain analysts have pointed to just-in-time manufacturing—a strategy that encourages manufacturers to maintain a bare minimum of stock in their own factories to save space and costs—as the scapegoat for the current supply-chain crisis.

In just-in-time manufacturing, if one component is delayed, it can upend entire production cycles. And in the past 18 months to two years, such disruptions have become commonplace.

Global supply chains are still recovering from the whiplash caused by the city lockdowns governments imposed in 2020 to contain COVID-19. Initially, lockdowns in China closed factories, which stalled much of the supply side in global shipping.

Then lockdowns in the U.S. prompted a surge in demand, as people ordered electronics and gadgets to facilitate working from home.

Many other scattered disruptions—such as China briefly closing shipping ports in August and June to prevent a COVID outbreak, and the U.S. suffering a lack of truck drivers needed for offloading goods at docks—have crippled the shipping industry’s ability to rectify snags in their shipping schedules.

According to Bloomberg, 77% of the world’s ports are experiencing abnormally long turnaround times. Scores of ships remain anchored off the coast of U.S. and Chinese ports, idle, and waiting for space to dock.

The Crisis set to continue

Shipping companies expect the global crunch to continue.

This will massively increase the cost of moving cargo and could add to the upward pressure on consumer prices.

“We currently expect the market situation only to ease in the first quarter of 2022 at the earliest,” Rolf Habben Jansen, Chief Executive of Hapag-Lloyd Shipping Company said in a recent statement. But is this optimistic?

Shipping

The cost of shipping goods from China to North America and Europe has continued to climb over the past few months, following a spike earlier in the year, according to data from London-based Drewry Shipping.

The backlog at ports will have a ripple effect on jammed warehouses and stretched road and rail capacity. Logistics networks have been running at maximum capacity for months, thanks to stimulus-fuelled demand led by US consumers and a pickup in manufacturing. Truck driver shortages in the United States and United Kingdom have only exacerbated supply disruptions.

Plus, we will have an impending increase in demand as we approach the Christmas period.

No quick fix to the crisis

Demand is still robust, and experts believe these issues will remain over the next few months.

However, manufacturers can do their upmost within their sphere of influence.

Take HOBUT as an example. We have been largely unaffected by the crisis due to our heavy investment in our 10,000 sq. ft. purpose-built warehouse, enabling us to always ensure we hold a minimum of 3 months of Raw Materials.

Forecasting is key in keeping production lines moving at our Headquarters in Walsall, West Midlands and contracts being honoured is a top priority.

HOBUT closely forecast raw material requirements more than 6 months ahead and have close relationships with suppliers and customers alike.

Our videos show inside this facility and our dedicated raw material warehouse team pick components & raw material for our UK factory replenishing Kanban’s daily.