Dealing with supply chain disruption has been the steady drumbeat in the industry for more than a year. As peak season approaches, carriers such as FedEx and UPS are rapidly implementing new peak season surcharges to maintain profit margins as capacity demand continues to outpace supply. Still, new problems are arising following a resurgence of the global pandemic. With a zero-tolerance COVID-19 policy in place, port closures have been almost expected. And now, additional port shutdowns in China are undermining the overall flow of goods just as the back-to-school rush winds down and as shippers begin to enter the peak holiday shipping season. In this article, we aid shippers in understanding why these shutdowns are occurring, how they will affect the replenishment of inventory, what other disruptions might occur in tandem, and how a data-rich shipping strategy can help.
Why Port Shutdowns Are Continuing
China partially closed the Ningbo port, the third-largest port on Earth, during the week of August 9, 2021, after a COVID-19 case was reported at one of its terminals, according to Reuters, resulting in a decrease of activity 10% below the port’s average daily level for July 2021. Within a week, the vessel backlog awaiting a place at the dock rose to 18 on August 17. And now, there are additional worries hitting the ports along the west coast of the US. According to Paul Berger of The Wall Street Journal, “thirty-seven container ships were anchored off the adjacent ports of Los Angeles and Long Beach in recent days, according to the Marine Exchange of Southern California, the highest number since February, when 40 ships waited there.” These events will undoubtedly create challenges with replenishment efforts.
Added Port Shutdowns Before Chinese Golden Week Will Undermine Replenishment During Peak
The industry is experiencing a dual disruption coming out of the events in both China port shutdowns and accelerated demand for inventory replenishment, causing backups at US ports. As the backlog of vessels grows at the Ningbo port, depending on how long the partial closure lasts, it will lead to a severe bottleneck at other destination ports. The looming transatlantic hurricane season and the overarching strain on domestic shipping modes, particularly ground and parcel, only add to the tensions. These factors undermine replenishment, and there is little hope of a full inventory recovery prior to the real beginning of peak season. Remember, peak season started right at Halloween last year when Amazon launched its online holiday shopping sales a month earlier than usual. Time is of the essence, and shippers need a resilient supply chain to survive. There’s also the issue of Chinese Golden Week (October 1-7). That alone typically results in port shutdowns, meaning shippers usually pull out all the stops to ramp up shipping in the weeks leading to the holiday. However, the added pressure is only going to make things more challenging in both finding capacity and getting it to the US on time. Additionally, we can expect longer transit times for inventory as it goes from ports to inland transportation, especially as the port shutdowns have a knock-on effect of surges at other ports, like Long Beach and Los Angeles. These knock-on effects are seen in the current drayage trucker and chassis shortages that are only increasing costs and impacting transit times, according to Supply Chain Management Review. Shippers need to plan and prepare more months in advance than previous to continue to keep inventory levels at a level that does not create a “perma-reactive” state.
Resilient, Data-Rich Supply Chains Are the Solution
The supply chain is no stranger to peak season disruption, but ongoing port shutdowns are a new challenge shippers must face. Annual disruptions like hurricane season and peak occur and lead to more demand on all resources. Additionally, shipping rates are already above their 2020 peak season levels.
The only way to navigate these mounting issues comes from strategic planning and data-driven execution of shipping. That means knowing when to push shipping ETAs by a few days to take advantage of other modes that are usually overlooked in the age of next-day shipping, e.g., ground. Or leveraging the data to analyze how long it takes to get shipments out of the port once arrived and to determine whether importing to a different port farther away but with less drayage time is more optimal. In reality, shippers need to start thinking outside of the box, identifying their strengths and weaknesses with data-rich reports that show average zone, areas where zone skipping might be applicable when to leverage hub injection, which modes may be more advantageous for transportation spend management goals, and which carriers are most likely to have available capacity.
To respond to disruption and build in more resiliency and flexibility, shippers may leverage actionable insights uncovered when analysis of shipping data is conducted. However, shippers first need a mechanism to ingest that data into one repository that aggregates, cleanses, normalizes, and then analyzes data. How? Through freight invoice audit practices, data is collected from all shipping activities. The technology then runs this data against carrier contracts on over 150 points to recover opportunities regardless of the amount. Automated processes then execute dispute submission and resolution tasks to drive significant savings for shippers, improve their bottom line, and return the savings to their customers. In addition, the proprietary technology leverages invoice data to find opportunities for process improvement and potential cost savings that may otherwise remain undiscovered. These soft dollars contribute even more to the client’s bottom line.
Get the Data Necessary With Intelligent Audit
Data is essential to driving success within supply chains throughout the rest of 2021 and beyond. Intelligent Audit’s customers can monitor key performance indicators that affect logistics operations across different modes, channels, providers, and charges, all in one data repository on over 750 standard reports.. Contact Intelligent Audit now to learn more about how your team can navigate the uncertainty of peak season with data-driven shipping management.