Two major industry gatherings are underway right now – the annual Transpacific Maritime Conference hosted by the Journal of Commerce and FreightWaves’ Global Supply Chain Summit. The former is a long-established mainstay, the latter an up and coming event.
At both, shippers are hearing bad news from analysts and carriers about what they can expect for the remainder of 2021 and possibly into 2022 – that conditions entering the annual contracting season for the eastbound transpacific favor carriers for a number of reasons and they remain in control for the foreseeable future.
The congestion in Southern California is, and continues to be a problem. Carrier equipment shortages, COVID protocols on the piers and a stay-at-home e-Commerce boom that fueled purchasing after the long gulf between Chinese factory closures in late January and the country’s ability to resume manufacturing that led to dozens of additional blanked sailings were the first step. The cessation of regular, reliable air freight service drove many commodities to sea out of necessity, creating additional demand. Finally, the stay-at-home consumption driven by the pandemic and several rounds of economic stimulus has people purchasing goods because they’re not in a position to be purchasing services.
So what does this mean for buyers of ocean freight?
It means that – according to this story in FreightWaves – that the delta between what large shippers and small shippers pay is narrowing as both groups are paying significantly higher. Logistics departments accustomed to squeezing 5% annual cost reductions have found themselves going to their company leadership reporting 40 – 70% increases.
Shippers also can sometimes count on one or two carriers in a lane to take individual actions that lowers or undermines announced increases by major players. Little to none of that is happening this year, given the backlogs and demand.
Will a funneling of money to services like travel or eating out mean the demand lessens? That’s not likely in the short term with another round of stimulus working through Congress that needs to pass by mid-month before key unemployment benefits begin to expire.
Taking all these conditions into account – Alba Wheels-Up understands the situation. We are working with clients to find ways to lessen the impact of double-digit transportation costs by seeking savings elsewhere in their supply chains, either through sourcing, fulfillment options, classification and/or valuation. If your company is interested in having one of our professionals review your supply chain for opportunities, contact us today.
