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Keeping Your Business on Track During the Coronavirus Outbreak


Keeping Your Business on Track During the Coronavirus Outbreak

The coronavirus outbreak, which is severely affecting business operations around the globe, was recently declared a global pandemic by the World Health Organization. C.H. Robinson continues to monitor the situation in the U.S. and globally, staying close to our contract carriers and discussing continuity plans in the event shipping trajectories need to be adjusted due to disruptions or closures at any ports. Although this is not the first or the last event to disrupt global supply chains, unpredictable logistics require a proactive approach for importers and exporters to keep business running as usual.

The latest in air and ocean travel

As factories and production in China return to full efficiency, the whiplash in other areas is starting to take place, particularly in consuming nations such as the U.S. and Europe. We continue to see elevated cases in developed nations that have a heavy reliance on manufacturing outside of the U.S., specifically China. Given this continued volatility, global importers are eager to restock their inventory. As a result, available capacity on the Trans-Pacific will continue to be volatile due to the removed capacity in the market.  The empty container supply has also dwindled in regions where China trade has been a catalyst, primarily North America and Europe, this can have a ripple effect if these empty containers do not get repositioned back to China to support the increase demand that is anticipated at the tail end of March into April.

Similar to China, airlines have canceled majority of passenger flights in and out of Europe and South Korea due to safety concerns and lack of travel demand. Cargo space may be constricted as certain limitations are imposed on passenger travel resulting from adjusted flight schedules and capacity. Although passenger planes have been used to transport cargo more frequently in recent years, available capacity is not heavily impacted by the cancellations due to air charter operators and blank sailings diminishing from ocean carriers. However, contract rates and transit times may need to be adjusted as the airfreight market remains fluid.

As we continue to closely monitor the situation, below are important considerations that will help keep your supply chain moving and better navigate any shipping challenges associated with the latest travel restrictions and schedule shifts.

Assessment of inventory levels

Having an accurate assessment of your inventory is expected, but it’s important to understand how limitations on imports, not only from China but around the globe, will impact your current inventory and regular shipping cadence. If you haven’t already, start discussions with your freight forward around production planning and forecasting. It’s important to look ahead to determine your transportation needs as demand is expected to surpass available capacity in the coming weeks.

Planning ahead in production

There are numerous variables to consider when planning for production. Working through these with a supply chain expert will help you be prepared and proactive as the uncertainty around the virus continues.

-What will production look like and has there been any discussion with the vendors and factories?

-How are existing inventories compared to sales projections?

-What plans are in place in case there continues to be a shortage of workers in China or the demands are not being met within a specific window of time?

-Has there been a discussion about how the backlog will be addressed?

-Where are your warehouse locations in proximity to delivery locations? Ensure you have business continuity plans in place, so deliveries are not impacted.

-Do you have enough air capacity to address decreased passenger flights?

-Is an expedited ocean or sea-air being looked at as an alternate option?

Backup sourcing options

The current backlog in China is a prime example of the importance of a diversified supply chain – including modes of transportation, carriers and sourcing locations. When there is any kind of delayed start to production, keeping up with the workload poses a challenge, and backup sources may need to be considered. Additional sourcing options are not always easy to find and keeping up with the sheer demand and quality controls can be a challenge. Connecting with a global supply chain expert to vet reliable options is important to help ensure success.

While we may not know how long this global pandemic will last, C.H. Robinson’s global network of experts are dedicated to helping you get your shipments where they need to be. We continue to closely monitor the situation and provide updates through our client advisories as needed. We encourage you to reach out to your account manager or connect with an expert for additional questions.


Sri Laxmana is the Vice President of Global Ocean Product at C.H. Robinson

Alliance shipping companies carry most ocean cotnainer shipments of export cargo and import cargo in international trade.

Consider These Factors When Negotiating This Year’s Ocean Contracts

The 2017-18 ocean shipping contract season is underway. As you evaluate your budget and ponder the best way to approach negotiations, you will want to keep costs down, consider options, and mitigate risks. But this year, there are four other key points you will want to keep in mind as you talk to ocean service providers.

The Hanjin impact. The Hanjin bankruptcy, one of the largest container shipping bankruptcies in history, has thrown ports and retailers around the world into a state of chaos and uncertainty. Large ocean vessels were stranded around the globe, and shippers worried about whether or not the merchandise would reach their shelves. After the South Korean carrier filed for bankruptcy protection and its assets were frozen, ships from China to the United States were refused permission to offload or take aboard containers because there were no guarantees that the operators would be paid.

After this experience, some companies feel they need to consider their carriers’ financials and do all they can to avoid putting their cargo on carriers that they perceive to be at risk. While companies are understandably concerned, avoiding one carrier in today’s environment of mega alliances may not be the answer—the fact remains that the cargo will continue to move with the carrier under a different bill of lading.

As I see it, the real lesson of the Hanjin bankruptcy is that companies should look beyond low price as the be-all and end-all of negotiations. Price is just one component of the decision-making process—not the only factor to consider.

Alliance reshuffle and independents. April 2017 marks the formation of new alliances. If you vaguely remember similar changes happening not long ago, you’re right. The three major alliances this year are 2M+Hyundai, THE Alliance, and Ocean Alliance, and as of April 2017, they are setting sails with new teams. The 2M Alliance now includes Maersk, MSC, and Hyundai (as a slot partner); THE Alliance includes NYK, MOL, K Line, Yang Ming, and Hapag-Lloyd; and the Ocean Alliance includes CMA CGM + APL, Evergreen, OOCL, and COSCO Shipping.

Although these three alliances control more than 90 percent of the transpacific trade and 96 percent of Asia-Europe trade, it is important for companies to look beyond each alliance to discover how they can better diversify their options.

Within THE Alliance, we know that the Japanese carriers will consolidate at some point next year. How can customers navigate with each carrier, knowing that their alliances will eventually change? There is no easy answer. What you can do is ask whether it makes sense to work across all three Japanese carriers today. Beyond that, we also know that Hyundai is not officially in the 2M alliance, and its agreement with 2M is only for three years. What will happen after that is still a very gray area.

In addition, there are a handful of carriers that are independent, including SM Lines, a “new” Korean liner in the transpacific market. Scale and alliances are critical in this industry, so watching for the long term strategy of these independent carriers is also vital.

There is another factor that must also be considered. U.S. legislators are so concerned about the limited antitrust immunity the ocean carriers enjoy today that they recently issued subpoenas to a few ocean carriers. Which begs the question, are the days of the alliances and conferences numbered? Only time will tell.

Carrier profitability. Bunker prices—by far, the largest operational parameter for ocean carriers—are slowly creeping back up. This is in part a result of OPEC and non-OPEC members deciding collectively to curb production of oil. As bunker costs increase, so does the pressure on rates. Overall, prices have increased compared to May of 2016. And while the amounts vary, the trend upwards is undeniable. While carriers argue these increases are not enough to push them into profitability, some increase is far better than none.

There continues to be a supply and demand imbalance. We saw this last year after rates took a spike, post-Hanjin’s demise, due to the simple fact that supply decreased while demand increased overnight. This continued imbalance will further add pressure on rates.

Some have speculated that with the new alliances, carriers will have better deployment strategies. We will have to wait and see. What happens with rates on May 1, 2017, will be an indicator to watch. If rates are too high, the market could crash, causing near-instant chaos. If rates start too low, supply and demand may cause spikes in the industry. A modest increase, such as the one we’re seeing today, might be the silver lining that this industry needs.

Many companies wonder if another ocean carrier will go out of business due to their financials. While we do not have a crystal ball, there are good reasons to think that we will not see any of the carriers within the three alliances going out of business this year.

US infrastructure. Many shippers focus their negotiation strategies on rates, space, and equipment at origin—all very important factors. But in today’s environment, people should also zero in on what happens after the vessel gets to its port.

Why is this important? As carrier alliances change, so do their terminal interests and subsequently, the rail interests for inland cargo. Unless both are seamlessly and efficiently managed, there can be monumental delays. Year over year, we have seen increasing issues and inefficiencies at the port with incremental volume increases or small volatility. A select few ocean carriers want to capitalize on market inconsistencies by charging demurrage above and beyond what the rail lines charge across the US interior.

Practices like these are not widespread, but the behavior is troubling. As you negotiate with carriers, be prepared to ask what they are doing to work toward a collective solution and improve efficiency.

Keep these four factors top of mind as you develop an overall strategy for negotiating with ocean shipping providers this year. Your budget will thank you for it.

Sri Laxmana is director of ocean services at C.H. Robinson.

It's important to prepare for passible disruptions in shipments of export cargo and import cargo in international trade.

Countdown to Black Friday: From Across Oceans to Store Shelves

Black Friday: a shopping bonanza for bargain-hungry consumers and a day of record-breaking sales for retailers. It’s also the ultimate test of preparedness for supply chain professionals. Planning for the holiday surge starts months in advance—a step that’s even more critical when your freight needs to cross oceans.

After a purchase order is placed, it takes roughly 25 to 30 days for ocean containers to leave Asia, travel the ocean, clear customs, and ship from the U.S. port to final destination. If you have a product coming from overseas that Black Friday shoppers can’t wait to get their hands on, chances are that those shipments are en route or have already arrived at your distribution centers or stores.

Under typical circumstances, supply chains are complex. But during the busy season leading up to Black Friday and the holidays, supply chains can also seem downright brittle. One disruption—like a weather-related incident, a sudden shift in consumer demand or ocean capacity, or a business impact, like labor disputes or the Hanjin Shipping bankruptcy—and the entire supply chain can come to a halt. And for many, that’s simply not an option.

If you do experience delays that stem back to the Hanjin bankruptcy, it’s not entirely impossible that your product won’t make it to the shelf by Black Friday. Talk to your third party logistics provider (3PL) about transloading and multimodal capabilities or expedited air freight services as options to help your product get where it needs to be.

Unfortunately, it’s hard to determine when supply chain disruption from the Hanjin bankruptcy will end, as there are many moving parts. The key, as always, is to stay on top of what’s happening in the industry and know which alternative means of transportation are available.

Sri Laxmana is director of ocean services for the Global Forwarding division of C.H. Robinson. Sri has been with C.H. Robinson for more than 15 years and has worked in customs brokerage, ocean and air imports and Exports, business development, and trade management.

Editor’s note: As one of the United States’ biggest single shopping days of the year nears—and the unofficial start of the U.S. consumer holiday shopping season begins—we’ll be highlighting several areas of logistics that are integral in making Black Friday possible. The next in the series will appear on Wednesday, November 16.