Yantian Port Congestion: How Can Shippers Navigate Another Major Supply Chain Disruption?

While the global logistics industry has not been a stranger to disruption this past year, the congestion at the Port of Yantian in China is starting to impact the market at an exceptionally high level. At the current pace, it’s going to be even more disruptive than the Suez Canal blockage this spring and the ongoing congestion at the Port of Long Beach/LA over the past year. This is due to the magnitude of the trade lanes and exports the port touches. Unlike the Suez Canal incident or other recent port issues, which have impacted a more limited number of regions and trade lanes, the Port of Yantian is a major export hub for multiple large markets like Europe, North America, Latin America and Oceania.

This disruption also came on top of an already brittle logistics system which is currently grappling with several unprecedented challenges, including equipment shortages and decreased schedule reliability, to name a few. Right now, the reliability that the vessel carrying your goods or expected to pick up your goods will show up on time is roughly 5%. At this time last year, it was around 80%+. And, as ocean carriers introduce more blank sailings or skip ports to start improving the reliability percentage, that means the freight that was skipped is now added to the backlog of containers that will flow into the next vessel.

It’s likely we won’t see a large shift in congestion until the demand levels out. And while this market does not lend itself to a silver-bullet solution, there are things shippers can do to keep their supply chain afloat:

1. Be open to hyper flexibility

While flexibility is important any time global logistics are involved, the phrase ‘now more than ever’ holds true here. Currently, delays at the Port of Yantian are ranging from 10-15 days, which is a large jump from the 2-7 day delays we experienced just few weeks back.

Switching between ports, modes, and trade lanes has been an active strategy to avoid these delays, but shippers can’t rely on only adjusting once or twice since other shippers are also making these shifts as they compete for limited space. A good example of how this plays out is in the case of congestion at the Port of Oakland. Over the last few months, as the delays at the LA port were mounting, carriers started diverting sailings to Oakland. The result? Oakland is now also severely congested and suffering from the same unpredictability.

Fact remains, ocean carriers are deploying the most capacity on the U.S. west coast (USWC) routing, and as complexities in the interior of the U.S. continue to be exacerbated (i.e. lack of chassis and rail congestions), carriers continue to limit options for containers moving inland. Shippers need to continue to be flexible in enabling containers terminating on the USWC and leveraging transloading and trucking inland options.

When considering flexibility across modes, keep in mind air may be the solution for a few shipments, but it’s not a feasible option to shift all your ocean freight to air. Instead, exploring a mix of modes, like LCL + air, may offer a more realistic opportunity for your company in a more cost-competitive way. Having the right partner with a global suite of service and technology offerings coupled with scale and a strong inland network, is going to make the difference for supply chains in the market.

2. Prepare for ultra-prioritization

Prepare to make tough decisions on what freight is most important to move. This can be especially difficult for companies importing seasonal items, like patio furniture or pools since their selling window is limited.

With today’s demand, most shippers would classify all their freight as a top priority but shipping it all at once may not be realistic. It’s important to sit down and have those conversations now so when the opportunity presents itself for portions of your freight to move, like in an LCL shipment, you’re ready to make the call.

3. Don’t dismiss historical data

I’ve been in the business 20 years and never seen anything like this in a global magnitude, impacting almost all core trades. However, a unique situation does not mean historical data no longer lends itself to helping us find solutions.

The market will improve, and things will get better. However, these issues tend to be cyclical as we look at the data. We need to build resiliency around supply chain and continue to have options to navigate. While some of these events are hard to predict and plan, there are things that you can do, such as diversifying distribution center locations, sourcing, etc.

Final Thoughts

Until the high demand subsides, the above points will be crucial moving forward. C.H. Robinson has always been focused on working alongside our customers to help them succeed – and that’s no less true during times of incomparable volatility. It’s important to keep an open line of communication and to be open to creative solutions. As we work through this together, I encourage you to keep tabs on our data-driven market insights page and reach out to your representative.

Archives, Global Logistics, Global Trade Daily, Ocean Carriers

Three Supply Chain Risk Management Lessons You Can Learn from the Suez Canal Block

May 5th, 2021 Sri Laxmana - Vice President, Global Ocean Product, C.H. Robinson Leave a comment

The Ever Given vessel is floating, but the ship is not out of hot water. In fact, Egyptian authorities said it will remain in the Suez Canal until they are compensated by the vessel owners for the damage, labor, and disruption caused. Although the cargo on the Ever Given is still at a standstill, other ships have been able to freely move through the canal over the past few weeks.

Even still, the effects of the Suez Canal block will continue to ripple far beyond the cargo that remains stuck on the Ever Given. The influx of delayed cargo has disrupted offloading schedules at ports, delivery schedules for shipping companies, and even orders sent directly to consumers. As an industry, it’s imperative for us to learn from this and develop strategies to minimize the impact of similar blockages should they happen in the future.

Now that we can view the incident in hindsight, I wanted to share three risk management lessons you can take away from this to create a healthier supply chain.

1. The entire supply chain can be impacted by one accident

Although the Suez Canal handles only 13% of global trade, its blockage rippled through the supply chain worldwide. The BBC reported that 369 ships were stuck waiting for the Ever Given to be refloated. Not only did all those ships have significantly delayed cargo, but the disruption created a backlog of cargo that continues to be felt today at ports, warehouses, shipyards, retail locations, and ultimately, by customers.

For an example of the negative effects this sort of delay can have, let’s look at perishable deliveries. Perishables are on tight delivery schedules that ensure the product arrives at its destination fresh and ready for purchase. Adding a week to the delivery timeframe for perishables can kill the entire supply chain. Even if the goods are still delivered in acceptable condition, they will not be able to spend as much time on shelves, resulting in a massive amount of food waste and lost profit.

The Suez Canal block has also affected supply chains through the ships that were rerouted from the canal. These ships will arrive later than expected and have a higher potential for damaged cargo as they spent more time navigating through rough seas. This may delay shipments, cause inventory shortages, and create logistical difficulties at various offloading points.

We have yet to even see the full range of effects that this mishap will have on the global supply chain, but it has proven that any incident in the supply chain ripples out to points all across the globe.

2. Flexibility is key

Congestion and disruption can always get worse. Because shippers and even logistics experts can’t always predict exactly what will happen, it’s important to have a plan for every eventuality. Planning ensures that you remain flexible and meet your goals, regardless of the obstacles faced along the way.

To remain properly flexible, you need to have a broad range of options on hand. For example, at C.H. Robinson, we assist our clients through our suite of global services. We use a diverse array of services to ensure that our clients are supported, no matter the situation. For instance, when approaching ocean shipping, we leverage full container load (FCL) and consolidation less than container load (LCL) ocean services to create a diversity of options for our customers. Not only does this allow them to choose the option they desire, it also provides them with alternatives should anything unexpected occur.

Additionally, using the insights gained from logistics technology, in particular from supply chain connectivity technology, can help you see what a supply chain error or delay will affect, making it easier to get ahead of the effects before they derail your operation.

Ultimately, this is all in pursuit of resiliency. Because there are so many moving parts in the global supply chain, it’s unreasonable to expect that each part will always be in sync. An excellent logistics plan with an excellent logistics partner combine to ensure resiliency against even the most unexpected events.

3. A risk management strategy is no longer a luxury

Since the global supply chain has grown so large and so complex in the 21st century, risk management strategies have become a necessity. In most cases, customers expect that they are a given. In the case of the Suez Canal incident, none of the ships stuck behind the Ever Given ever expected that the Suez Canal would be blocked, and no one on the Ever Given expected to become lodged in one of the world’s most vital trade passages. Regardless of expectations, these accidents occurred, and everyone was scrambling to mitigate the risk.

Because no one can predict such incidents, it’s vital to have risk management strategies in place well before any issues occur. Even before the Suez Canal blockage, the importance of risk management for ocean shipping had been increasing. In February, we touched on the increase in vessel accidents over the past year. In that article, we discussed how to prepare for a vessel accident, and many of the same lessons that we imparted there apply to this situation.

Specifically, the two most important pieces of advice that carry over are purchasing maritime insurance and working with a provider with a global suite of services. We’ve already discussed the importance of working with a reputable, well-connected provider, but it bears repeating that a provider with a global suite of services can correct issues faster and more effectively than you could on your own.

Maritime insurance is something that we highly recommend purchasing whenever you engage in ocean shipping. Imagine how you might feel if you were carrying a large amount of produce that rotted while you were stuck in the Suez Canal. Even worse, imagine you were the managing company of the Ever Given, now being asked to pay up to $1 billion by the government of Egypt for the affair. If you found yourself in this situation and did not have maritime insurance, your company could quickly find itself sunk by a combination of lost revenue and damages. Even on a smaller scale, if you were shipping cargo through rough seas and a single container were lost or damaged, having insurance would save you from stressful financial headaches.

Spare yourself trouble by staying prepared

Issues like the block in the Suez Canal have a lot to teach shippers and logistics experts about the interconnected nature of global supply chains. To provide the highest possible level of service to your customers, consider the plans that you have in place for when something goes wrong in the supply chain.

Ready to protect yourself against supply chain disruptions? Connect with our global network of experts to see how C.H. Robinson can provide solutions for your business.

Archives, Global Logistics, Ocean Carriers

Preparing for Rough Waters: How to Handle Freight Lost in a Vessel Accident

February 12th, 2021 Sri Laxmana - Vice President, Global Ocean Product, C.H. Robinson Leave a comment

Maritime insurance executives estimate that 3,000 containers have been lost at sea over the past few months alone. Compared to the 1,382 containers on average lost per year between 2008-2019 as reported by The World Shipping Council, that’s a big jump. What’s the reason for it?

As you may have expected, there’s not a simple, all-encompassing answer, instead, there are multiple variables at work. The good news is, there are steps you can take to help prepare for any delays or disruptions that result from a vessel accident. As a platform that works with the many different vessel operators to move our customers’ goods, we share some key things to know.

Why are vessel accidents increasing?

There are more containers on the water than ever

Over the years, vessels have increased in size and capacity. As such, they move more containers and can stack them higher. Add in the high demand for ocean service over the past few months and a decrease in blank sailings that would typically remove capacity, there are more vessels and containers out on the water.

Poor weather and high stacks of containers don’t mix

While vessels generally avoid storms, going through a relatively bad weather cell can happen. Ocean vessels are designed to roll in motion with the waves, however powerful waves caused by bad weather combined with high stacks of containers can change this rolling motion. In these situations, vessels undergo a synchronous and parametric rolling, which often causes vessels to tip at angles that displace higher stacked containers.

What are carriers doing about vessel accidents?

Ocean carriers are looking for ways to optimize how they block and brace containers to minimize accidents – including continued rigor around weight distributions, misdeclarations, improper packing and storage planning. There is also research being done into how technology can help sense container movement, allowing for faster reactions.

How to prepare for a vessel accident

Until your freight has been involved in a vessel accident, you may not be aware of the process or overall impact on your supply chain. Although vessel accidents are unplanned and usually unpredictable, there are steps you can take before you ship so you’re not scrambling when you get the news your freight was involved in an accident. Here’s what you need to know.

Have a backup plan to deal with delays

For starters, even if your freight is not lost at sea, you’re still likely to experience significant delays. For example, a recent maritime accident in December 2020 resulted in freight being held in Japan. In this case, each container (that was not damaged or lost at sea) needs to be unloaded and transshipped to another vessel for transportation. Access to the unimpacted containers can also take a while as the unloading and inspection of damaged containers might need to take place first.

Consider purchasing maritime insurance

One of the avenues to help protect your company financially is through maritime insurance. Cargo insurance is not a requirement, but as events like vessel accidents are usually outside of the carriers’ liability, insurance can provide added protection for your freight. With a cargo insurance policy, you are covered for unexpected losses.

Develop a resilient supply chain strategy

Unfortunately, insurance only applies to the value of lost freight. It cannot help you overcome delays, transload freight, or expedite new orders to realign inventory levels and ensure adequate stock is where it’s needed most. That’s where supply chain resiliency comes in. Rather than wait until you’re impacted by a vessel accident, now is the time to develop a plan that helps you minimize the impact to your business and allows you to continue serving customers.

Rely on a provider with a global suite of services

We recently had a customer impacted by a vessel accident. While their freight was not damaged, it was delayed. Unfortunately, equipment shortages and capacity constraints almost prevented the replacement stock from arriving on time. Through quick communications with our local team in South Asia and thanks to our extensive relationships with global carriers, we successfully secured the space and containers they needed.

But that was only the first hurdle. The original destination port had high congestion and vessel dwell times, so our team shifted to a different port and was able to keep an additional 20 days off the transit time. A transportation provider with reliable service and a global network is the best way to get the careful coordination and market insights these types of situations require.

You can prepare for the unexpected

Developments in technology and changes to freight blocking and bracing will never offer full protection from vessel accidents. Think about the vulnerabilities your supply chain could face in the wake of a vessel accident now to help you minimize the impact to your business in the future.

Ready to drive smarter solutions to prepare your supply chain for a vessel accident? Connect with our global network of experts.