Good luck trying to fix the supply chain crisis


Cole’s experience points to a range of factors currently holding back the global supply chain. First, the items were incorrectly manufactured, which Cole suppliers have blamed on energy rationing in China as the country tries to move away from coal power; Then Cole’s contacts in China were unable to find a cargo ship to fulfill the order. Cole believes that two 40-foot shipping containers will be loaded onto a ship near Shenzhen on November 13, but the items did not reach sea until November 19. “Even after it leaves port, it’s supposed to be an 11-day sailing between Shenzhen and Sydney, but they’ve added three more days, Cole says. He’s not sure the elements will end up on shore until then, and there’s no guarantee the Australian side will be smooth sailing.” Also, he says, “It usually takes a couple of days to get things from the port to the warehouse, but I’m not at all confident.”

The inability to accurately track orders is an issue across the shipping supply chain, and exacerbates broader problems, Levinson says. “There is no real-time traceability for most shipments that go through the shipping system,” he says. “That’s why the four winds scattered things and things disappeared.” This uncertainty has been exacerbated by severe disruptions to the supply chain over the past year, from last-minute port closures due to the COVID-19 outbreak – as happened in Ningbo, the world’s third-busiest port, in August 2021 – to the temporary closure of the Suez Canal. The canal, through which 12 percent of all global trade passes, took place in March 2021. China also required 20 of its largest cities and provinces to reduce energy consumption for the rest of the year to try to meet environmental targets, prompting factories and industry to work for only part of the day.

The result? A global slowdown in the supply chain has thrown everything into disarray — and made shipping items around the world more expensive than ever. “The economics of shipping is great for ship lines,” Levinson says. “They are making record profits.” While shipping rates have long been lopsided, with shipping container shipping costs higher from Asia to Europe than from Europe to Asia, costs have gone up across the board. Shipping one 40-foot container from Shanghai to Los Angeles in early August 2019, for example, costs $1,700. A year later, it rose to $3,000. By August 2021, it cost $10,200, according to data tracked by analysis firm Drewry World Container Index. Cole previously paid about $2,500 to ship one 20-foot container from China to Australia. Now it is $5500. “I get a little worried when I see the bills for my 40-foot containers,” he says. “I don’t get the bills until the container lands in port.”

With such high prices, many large companies eschew the traditional shipping industry and go it alone, finding it more economical to do so. Costco has chartered three container ships that will deliver goods to the United States and Canada from production facilities in Asia, as have Walmart, IKEA and Home Depot. “Inflation factors are many,” Richard Galanti, Costco’s chief financial officer, told investors when announcing the company’s latest financial results. “Rising labor costs, rising freight costs, rising transportation demand, port delays, increased demand for certain product categories, miscellaneous shortages of everything from computer chips to oils and chemicals, and rising commodity prices” have affected the retailer’s business, Galanti added. Those who haven’t chartered their own ships are feeling the impact. Half of Victoria’s Secret lingerie retailers are stuck in the sea. The rest is moved — but that now takes nine days instead of two, because the race to snatch supply flights is causing a backlog of business there, too.



Source link

Share:

Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings