China's Ship Delays are Increasing Backlogs
When COVID-19 hit and the world shut down, the supply chain was crippled in a multitude of ways. However, the emergence of effective vaccines provided a proverbial light at the end of the tunnel—until the virus began to surge again in certain regions and things slowed to a snail’s pace once again.
The impact of these dynamics has been especially significant in Chinese ports since they handle such a large portion of the world’s goods. As a result, ship delays there can quickly add up, creating a ripple effect of backlogs around the world.
Although there’s growing worry about these trends, the good news is there are certain strategies companies can take to help ease the burden of a global supply chain that seems to have a mind of its own.
When a Critical Gateway Slows Down
A perfect example of these dynamics is the recently expanded Yantian port in southern China which Reuters describes as “a critical gateway into China.” Citing the regional Shenzen government, Reuters notes that typical traffic there involves “around 100 vessels calling weekly, 60% of which operate on European and U.S. routes.”
In that light, the partial shutdown that occurred there recently is having a major ripple effect on congestion trends and contributing to a growing backlog in the global supply chain.
Although the halt to receiving export containers at Yantian announced in late May was only expected to last for a few days, it has taken a lot longer for normal operations to resume.
In fact, the volume of containers unable to exit south China due to the dynamics at Yantian quickly outpaced the number held up by that sideways ship in the Suez Canal.
During the delay, backlogs began to build as companies were forced to either leave their goods languishing in the harbor or divert shipments to other Chinese ports—which only increased congestion there.
The result of both is an anchor line off the coast of China that’s about 50% higher than the comparative average.
And even when things do get back on track at Yantian, experts predict it could take weeks to return to normal port flow—as evidenced by Drewry’s June 25th weekly analysis of its Cancelled Sailings Tracker:
“Yantian International Container Terminal (YICT) advised on the 16th of June that the bottleneck at the port had eased, and normal operations would resume by the end of the month. However, the ripple effects of Yantian disturbance on the overall supply chain remains important. Shippers and importers are suffering from rollovers, lack of empty equipment and space availability, and an additional hike, this week, in the already astronomical spot rates.”
Worrying Supply Chain Trends
Trends like these underscore a growing worry about the persistent congestion ports are now facing and the impact on the rest of the world.
With the holidays looming, there’s also potential that increasing backlogs might mean that retailers counting on the normally-busy shopping season won’t have enough in-stock products to sell.
Added to all that are historic shipping rates that will likely be passed onto consumers. That’s certainly unwelcome news since inflation is already surging in the U.S. and causing an additional concern for global markets.
There’s so much concern about the global state of shipping, that the Coast Guard and Maritime Transportation Subcommittee held a hearing on June 15th entitled, “Impacts of Shipping Container Shortages, Delays, and Increased Demand on the North American Supply Chain".
Here’s Chair Carbajal's Opening Statement:
Source: U.S. House Committee on Transportation and Infrastructure on YouTube
3 Strategies to Address Supply Chain Instability
Although things may seem a bit dire in the shipping world right now, there’s good news, too. By following certain strategies, companies can better mitigate risk and deal with issues associated with supply chain instability. These strategies include the use of forecasting and predictive scheduling for optimization, and tapping into a global network of reliable business partners.
1. The Power of Forecasting
Forecasting can help mitigate supply chain risk by aiding in the prediction of product needs to achieve a balance in supply and demand. It can also help to predict how various factors will impact pricing.
Supply forecasting analyzes supplier data to predict how much product can be available within a specific timeframe and is influenced by factors that include things like delivery capacity, technologies in use, and weather—among many other things.
Demand forecasting evaluates expected customer needs during a specific timeframe to help inform optimal stock levels. It’s influenced by factors such as consumer confidence, societal trends, and whether a busy shopping season may be involved.
Price forecasting analyzes multiple factors that affect supply and demand to predict how each will affect product pricing. All three types of forecasting influence the others, as do external factors that have a ripple effect across the supply chain.
Although forecasting is vital to effective supply chain management, it’s also complex—which is why companies who want to keep customers happy while optimizing return on investment (ROI) need the right resources to apply it.
2. The Role of Predictive Scheduling
A close cousin to forecasting is predictive scheduling, which is enabled by advanced analytics that make use of big data and algorithms that integrate specific factors to support decision making. This is possible, in part, through the use of cutting-edge technologies such as artificial intelligence (AI) and the Internet of Things (IOT).
The combined use of applications such as these support predictive scheduling by enabling supply chain transparency.
The use of algorithms in this way is also referred to as algorithmic optimization, in which “Systems provide recommended actions and, if desired, the system can be enabled to automate the optimal decision.” There are many applications for algorithmic optimization in the supply chain, and predictive scheduling is one of them.
3. The Critical Need for Networking
Although technologies like these offer many benefits, they can’t replace the enduring importance of a global network of reliable and trusted supply chain partners.
With an increasingly complex supply chain, it’s nearly impossible for companies to handle the intricate logistics involved without help from others.
That’s why outsourcing international supply chain services has become a regular practice. This type of collaborative co-management is common in the transportation industry and demonstratives the power of global network partnerships.
Since each company has unique needs, it’s critical to partner with a co-management team you can trust that can provide comprehensive outreach and the customizable solutions required.
CLN Worldwide is exactly that type of partner.
We take pride in offering customizable and adaptable solutions to any international transportation operation or global supply chain.
Contact us today for more for a free demo.
CLN Worldwide www.clnusa.com email@example.com 704.756.6425