Long-Term Solutions to Ease the Overworked Global Supply Chain
September 27, 2021
Lockdowns and social distancing protocols led to a significant drop in purchases in 2020, followed by growing demand as countries began to reopen economies in 2021. Carriers, forwarders, and businesses have tried different solutions, from outbidding one another for containers to chartering ships and buying their own containers. This is what the Swedish giant Ikea and U.S. brands Home Depot and Walmart have done to address product shortages in the short term. So what can be done long term?
Shipping by Railway
Giants like Ikea have been shipping cargo by railway from China to Europe, using temporary warehouses for storage and distribution. Ikea has invested in intermediate warehouses across Asia, in countries like Thailand, Indonesia, India, Vietnam, and China.
Automated checkpoints have been installed at major ports such as Gothenburg in Sweden, scanning all containers unloaded at the port. Automation has reduced idling times by about 30 percent. The automated gates come with optical character recognition that can read check seals, warning labels, and container numbers, shortening truck turn times to 25 minutes. In contrast, average turn times are 56 minutes in the rest of Europe. The automated terminals at Gothenburg have doubled available port capacity and enabled 24/7 service.
Building New Ships
It takes about 2 to 3 years to build new commercial vessels, so any cargo ships commissioned now will not be able to ease the supply chain crisis in the short term. Shipping experts also explain that commercial vessels are expensive, costing up to $200 million apiece. Ordering a dozen of ships can be a costly mistake if carriers would only need them in the next couple of years.
What is more, commercial vessels have become bigger over the last decades, with some carrying about 24,000 containers onboard. The problem with big ships is that they need huge cranes and deep, large ports to dock. There is a limit to where giant ships can call. An added problem is the fact that big commercial vessels require significant resources in terms of port staff and warehousing. According to shipping experts, a better solution could be to invest in medium-sized vessels that could improve port processes by ensuring a more continuous flow of cargo and containers. Small ships carrying 14,000 TEU boxes instead of large ones carrying 20,000 TEU could reduce shipping times and accelerate transport. Smaller vessels also ease strain on road transport, shipping cargo by truck, train, and feeder vessel. Besides, large ships are only used to move cargo from Asia to Europe, calling in multiple ports to load containers before sailing to Europe.
Rethinking Business Models
So far businesses have been over-dependent on single factories thousands of miles away from production facilities and retail locations. This approach saves money and warehousing space but relies on supply chains always functioning as they should. According to economists, it is also time for consumers to rethink their shopping habits and behavior. Responsible consumption can help ease global supply chain strain.