The Shipping Crisis Is Getting Worse, Upsetting Retailers and Shoppers
October 6, 2021
A year and a half into the pandemic, the global shipping crisis is getting worse, with shortages of goods and rising prices. This year consumers are likely to face fewer choices during the holiday season. Giants such as Hasbro, Crocs, and Adidas already warned of disruptions due to the fact that supply chains are not expected to ease before next year. The cost of shipping cargo from China to Europe and North America has been climbing over the last couple of months, the main reason being unmet demand.
Why Port Congestions Cause Product Shortages?
Terminal shutdowns due to coronavirus outbreaks add to bottlenecks and product shortages. The closure of Yantian lasted only a few days but full reopening and return to normal services took much longer. The congestion at Yantian also spilled over to other terminals and ports. The congestion first spread to nearby ports like Hong Kong and Shanghai and then elsewhere in Asia, North America, and Europe. The West Cost of the United States has been particularly hard hit, with 36 commercial vessels anchored off the ports of Long Beach and Los Angeles. Truck driver and port worker shortages are exacerbating the situation, impeding the unloading, loading, and distribution of goods.
Adding to the problem is the fact that efforts to contain local outbreaks have resulted in traffic disruptions at the Nanjing and Shanghai Pudong Airports. This happens at a time when air terminals get large volumes of cargo due to international freight forwarding businesses increasingly turning to alternative methods of transportation.
Port Congestions Holding up Exports
Shutdowns at major points such as Ningbo are holding up cargo for the peak delivery season in Europe and the US. Exports usually arrive from September to November which may not be the case this year. Retailers struggle to replenish stock due to high demand, let alone prepare for the Christmas season. As retailers don’t have enough inventory, they already report missing out on sales.
Besides port congestions, there are other reasons for inventory shortfalls, among which insufficient land transport capacity, labor shortages, rising raw material costs, unfavorable exchange rates, and high costs for ocean freight and shipping containers. All these contribute to longer production times, lower customer service levels, rising product prices, and global shortages of many products, including materials for packing and decorating.
It is Time for a Change
Until now, retailers have been keeping their inventories thin to use their space to showcase a wide array of products. According to industry experts, the current crisis will fundamentally change the way businesses operate. Many will choose to maintain relationships with extra suppliers and stockpile more inventory as to hedge against future problems. As the pandemic showed that there is always disruption risk, businesses need to adopt strategies to ensure the continuous supply of goods, such being virtual warehousing, transportation demand planning, and negotiating with multiple ocean carriers. Forecasting demand can also help reduce the risk of product shortages.
