KPS AG Customer Experience
The beaching of the Ever Given, one of the world's largest shipping containers, must have been a rare moment in history where a shipping container disaster diverted the world's attention.
Beyond the hilarity, however, many were tearing their hair out. Stoppering the Suez Canal - said to have held up an estimated $9.6bn (£7bn) in trade per day - was really only a part of the larger shipping container crisis, which has caused a fundamental disruption in global trade.
Ships and ports as a result of topsy-turvy supply and demand. Other factors have contributed: like significant container downtime during the pandemic and unequal easing of lockdowns around the world. Major European ports like Antwerp, Rotterdam and Hamburg have been unable to cope. British ports, notably Felixstowe, have had significant backlogs for over a year. Even pre-pandemic, the industry was dealing with razor-thin margins and low investment.
Deutsche Welle reports that a standard shipment, typically priced at around £700 can now cost around £7,000 or more. Procter & Gamble said they have seen an added £432m added to the company's cost this year, with inflation levels reminiscent of the European debt crisis.
Britain is not without its own, chiefly Brexit-related, woes.
On land, the new visa criteria have dramatically cut available labour for goods transportation, in some places as much as half. Plus, rules around self-isolation to slow the spreading of the virus has led to chronic staff shortages and has resulted in supply chain 'chaos'. Supermarkets have been forced to cut certain produce, and increase prices where necessary.
Businesses have this to contend with, as well as the ongoing fallout of Brexit, which has made things more expensive, delayed and created a bureaucracy that is harder to navigate. The current situation is untenable for the greater share of businesses.
Added to that, experts warn against an optimistic view - this state of affairs is expected to last well into 2022, possibly longer. The recent partial closures of Yantian and Guangzhou in China - two significant ports for trade with Europe will powerfully strangle imports to the West and make it incredibly difficult for retailers to meet demand. This will particularly affect businesses who look to make a substantial portion of their profits during times of higher demand, like Christmas and Black Friday.
There are fears that later this year unexpecting customers will see a tremendous spike in prices across a range of goods, from produce to toys.
Should businesses make plans to outlast the current supply and labour problems - or make longer-term structural changes, seeking greater resilience in the face of an uncertain future?
Businesses have this to contend with, as well as the ongoing fallout of Brexit, which has made things more expensive, delayed and created a bureaucracy that is harder to navigate. The current situation is untenable for the greater share of businesses.
It isn't simply a rhetorical question - some businesses, especially larger businesses who sell in different regions, will probably elect to push through. They can do so by, for instance, compensating with savings in other parts of the business. They may also seek alternative suppliers: air or rail freight.
For others, including small and medium-sized businesses, it may be worth considering looking towards local suppliers and labour.
Delivery from local suppliers will be cheaper and faster, with more immediate solutions should something go wrong: it's easier to communicate in the same time zone, or when a supplier is down the road! Transactions are also more secure, with more easily traceable supply lines.
There may also be reputational benefits worth considering. Reducing carbon emissions by shopping locally provides a unique draw for ethical shoppers. And supporting local businesses provides a unique local selling point: creating a sense of authenticity and drawing from local culture. It may also attract further business from tourists who wish to enjoy the 'proper British experience'.
This has its own challenges. Transporting goods is seen as an underpaid, male-dominated, and boring profession.
In order to reach the necessary workforce, businesses will need to invest: to fund training, conversion for HGV (heavy goods vehicle) licenses for trained drivers and to encourage women to undertake training.
The shipping crisis is the result of a perfect storm of situations, and is unlikely to resolve in the near term. Even if it does, confidence in the global supply chain will take time to recover. Businesses that are in a position to do so may want to look closer to home for an answer to the supply chain headache. There are certainly advantages to doing so.
Article information
- E-mail: blog@kps.com
- Social Media: LinkedIn
- Publication date: Aug 18, 2021
- Update: Jan 19, 2022
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KPS AG published this content on 19 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 January 2022 14:40:07 UTC.
