One of the biggest challenges for logistics providers is balancing their equipment with demand. To maintain profitability as well as service, carriers try to minimize empty miles and non-usage. Empty miles for a trucking company represent the cost of repositioning equipment to meet demand. Non-usage, in the case of containers, represents a lack of outbound shipments in a specific area. In both cases these pure expenses will be reflected in the outbound rate.
On the west coast of the U.S. Containers are piling up causing a myriad of problems. Not the least of which is increased inbound rates for shippers. Providers, in some cases, are charging round trip rates or, at least, adding the cost of non-usage and repositioning costs. Compounding the problem is the lack of trucks at the ports to reposition the containers. It all adds up to increased shipping rates.
Zim Integrated Shipping Services will implement an equipment imbalance surcharge of $250 per FEU, both dry and high cube, on the Asia-North America trade from Dec. 5. Hapag-Lloyd instituted a $175 equipment imbalance surcharge for all 40-foot-high cube containers from China and Hong Kong to North Europe and Mediterranean ports, as of Nov. 15. All containers shipped by Hapag-Lloyd through ports in the UK to and from the Middle East and the Indian subcontinent, together with containers handled through Aden to destinations worldwide including the US, are the latest to have surcharges imposed, according to Hapag-Lloyd customer advisories.
Data from container availability platform Container xChange show the chronic shortages of 40-foot high cube containers on the China-Los Angeles route. On its Container Availability Index, anything below 0.50 indicates a shortage. The current level is at 0.18.
The sustained demand for Asian exports is worsening an equipment imbalance that has built steadily through the peak season on the trans-Pacific and Asia-Europe trades, with shippers facing rejected bookings, port congestion, and rising rates. Forwarders in the US and Europe are reporting chronic shortages of empty containers, with hi-cube FEUs out of China being in especially short supply.
No Solution in Sight for the Near Future
The supply chain has become unreliable and is a nightmare for any supply chain manager. The reputation of the maritime global supply chain has never been as bad as it is today. It is neither reliable, predictable, or resilient.
No doubt, container shortages are at crisis levels with an impact that’s both far-reaching and potentially devastating for supply chain.
Such consequences include:
- Exponentially higher shipping costs
- Monumental shipping delays
- Extreme short-term supply shortages
- Potential long-term scarcity of high-demand goods
- Consumer stockpiling that leads to skyrocketing cost of goods
Without a doubt, container shortages are a global crisis that’s yet to be resolved. What will help? Time, of course. As well as being proactive in taking countermeasures to combat the crisis.
Counter Measures for Logistics Planners
In this environment recruit all the help you can find. A qualified 3PL should be your first consideration. A 3PL can not only help with planning but with equipment procurement and rate negotiation. Secondly, prioritize your shipments. A phased approach based on the priority of critical/hot parts allows planners to maximize what little available containers there are. Finally, consider alternate destination ports.
These are some basic planning counter measures. For a more specific plan to meet your company’s needs contact us today @ www.Land-Link.com.
Stay Safe Everyone.
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