Are panicked US shippers and excessive buyers the reason for the current container crisis?



About a fortnight ago, a restless supply chain manager for one of the world’s largest BCOs rang the bell. Splash up. The executive – responsible for shipping over 60,000 fires on the Trans-Pacific – was adamant that the narrative with this year’s supply chain chaos was all wrong.

The elephant in the room with the accumulation of boxes on U.S. shores is not what is commonly reported, the supply chain chief said. The real cause of the problems was the massive over-ordering from panicked shippers.

“If there were real shortages, as many would have you believe, how come every warehouse in the United States is jam-packed? Panicked excessive buying, questionable forward sales forecasts and weak and inconsistent supply systems among US shippers are in fact the main reasons for this year’s supply chain disaster, ”said the veteran of the Asian-based supply chain, who preferred to speak on condition of anonymity. Splash.

So is this the case? Isn’t it the liners involved, nor the archaic US port and intermodal infrastructure as the main culprits of the extraordinarily strained global container structures of 2021? Splash asked for the verdict of experts around the world to deliberate on the matter.

Bjorn Vang Jensen, vice president of consulting firm Sea-Intelligence, admits factors such as panic buying, grossly inaccurate sales forecasts, and a tendency to view data sharing as risky and expensive, played a role in the collapse of the global supply chain.

However, these are all problems that have existed everywhere and forever, also long before containerization, he points out.

“In the past, almost any supply chain was able to roll with such hits, which are now mostly forgotten as minor irregularities in a dusty data set,” says Jensen, whose past career has included long runs. at Maersk and then across the negotiating table at Electrolux.

“What you see today is not just a black swan event, but actually a whole host of black swans, and growing day by day as more and more weak strands Web sourcing is increasing, ”says Jensen.

The United States is indeed the real origin of this fiasco, recognizes the Dane. Still, he has answers to why warehouses are so full.

According to Sea-Intelligence research, many industries in the United States actually have dangerously low inventories.

Another explanation is the very real shortage of drivers to transport goods from these warehouses which are in fact full to consumers.

A set of musical chairs

Steve Ferreira, CEO of New York-based Ocean Audit, describes the current situation of clumped boxes as a game of musical chairs.

“You don’t want to stand without a seat, and it’s a cycle that continues,” says Ferreira, giving some recent examples such as Walmart ordering 149 containers of trash on a single ship or a French tire maker. inking of a new charter in Houston.

“How are Michelin tires going to deliver cars that you can’t buy because of a chip problem?” »Ferreira muses.

Andy Lane of CTI Consultancy, a container advisor, cites both the archaic logistics infrastructure of the United States as well as the near impossibility for retailers to prepare for such a shift in demand that Covid has presented as the two biggest factors in the current situation of booming containers.

“America’s supply chains and logistics systems are fragile, but to balance that, no one would ever maintain capacity latency above 15-20%, which would be prohibitive under normal circumstances,” Lane said.

Ports cannot keep pace with increasing import demand over an extended period of time, neither can intermodal capacity and finally warehouses and distribution centers.

“The whole system comes to a standstill because it was never going to be able to absorb a 20-30% or more increase in consumer demand,” Lane said.

That said, Lane sees a huge void in planning and communication across all segments of the supply chain.

“Shippers / importers have tried to import more than their distribution centers and distribution capacity can handle,” Lane said, adding: “Carriers have tried to move more demand than they should have. knowing that ports and mainland can accommodate. Adding more floating capacity and container fleet is unnecessary if it creates a bigger blockage. “

This resulted in a massive waste of resources. “As a whole collective, all actors in the supply chain have simply ignored the constraints and have flooded the system in an unintelligent way to the detriment of all,” Lane argues.

Of all the capacity deployed on the Asia-North America west coast in 2021 so far, 19% has been lost due to congestion, and that figure rose to 24% in August, according to data from Sea-Intelligence. .

Liners playing games

Kris Kosmala, a Splash cColumnist and partner of the Click & Connect advisory board, says senders haven’t panicked. They were played by the liners, he argues in conversation with Splash.

“Everything went wrong with irregular departures when carriers reduced their capacity in response to Covid fears,” Kosmala said. This deprived shippers of the scheduled services on which they were building the execution of their supply chains. So they ordered more and those orders piled up in containers waiting for slots that weren’t there.

“It happened,” Kosmala says, “long before Maersk went public with heinously advising shippers to double their stocks and import more just in case.”

Eventually the carriers started to add capacity, but at that point the backlog was just too big to handle.

“Even if the carriers immediately restored services to 100%, it would have taken two years to ship all that backlog mixed with all the regular shipments that were adding to a normal rate,” Kosmala said.

The carriers remained very cautious in restoring capacity, which only made the problem worse and extended the catch-up period, he argues.

The supply chain is not perfect science

Dr John Gattorna, a Sydney-based thought leader and global supply chain author, says there is never just one reason for everything, especially when discussing supply chain .

The “Covid curve ball,” he argues, has exacerbated capacity management issues that already existed before the pandemic.

“The supply chain is not a perfect science and people need to be more flexible in their thinking,” says Gattorna, advising management to add more redundancy to their supply chains.

Covid has shown multinationals that they need to think more about shorter supply chains, possibly higher costs in order to be more resilient, Gattorna believes. The speed of decision-making will be vital in navigating the future balls of the curve, which we all have to accept.

In conclusion, Lane of CTI said, “In this game it is difficult to lay the blame, because it seems that most of the stakeholders are victims of the circumstances, and all of them suffer. With the exception of the avid American consumer, blaming a specific aspect of the door-to-door chain isn’t really objective.


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