The new year will bring with it a new set of challenges for companies, says Lora Cecere, founder of Supply Chain Insights. Even though goods are moving more freely compared to bottlenecks faced in 2021, supply chain operations are not back to normal, she cautioned.
Logistics is no longer a key challenge but rather, one of many factors that supply chain teams must balance each day. This is because the pressures on supply chains are shifting and taking on a new form, Cecere said.
The focus has turned toward balancing the recovery from record inflation, drastic shifts in demand, slowing growth, warehouses filled with wrong inventories, supply shortages, and the unknown risks from the lifting of China’s zero-COVID policy. According to the Global Supply Chain Pressure Index (GSCPI), which is used as a measure of supply chain conditions, global supply chain pressures are greater now than during the past decade (see Figure 1).
Cecere notes several aspects not in the GSCPI that will need to be considered in managing supply chain disruption. Firstly, dual pressures in the form of inflation and recession. Organizations need to monitor and manage inventories closely in the currently volatile economic environment. Secondly, a shift in purchasing patterns during a demand downturn would pose a challenge. She notes “only 2% of manufacturers and retailers can effectively use market data to sense and predict market shifts with minimal latency”. Thirdly, Cecere said problems with supply will continue to persist as companies deal with COVID-related issues, the war in Ukraine, and food insecurity in Africa. Lastly, weather disruption was the fourth factor not on the index. Cecere said only 9% of companies actively design supply chain flows “to move goods and services seamlessly through changing weather patterns”.
Source: Forbes
The International Air Cargo Association (TIACA) predicts the next 12 months will be challenging for air cargo demand as the market faces reduced consumer spending due to high inflation, high-interest rates, high energy costs, and concern over job security.
TIACA expects national economics to have a significant influence during the first half of 2023. It also outlined some positives for the industry. "…the current situation is temporary and we can hope that later in 2023 central banks will start reducing interest rates when inflation is considered to be under control,” TIACA said in its newsletter.
Although high energy costs are expected to persist, particularly in Europe, TIACA noted that "structurally the industry is in a good place". The association was optimistic demand would pick up toward the second half of 2023.
“We can expect further capacity increases as freighter conversions and production deliveries look very buoyant for the next few years. We can also see the continuing return of passenger operations bringing further belly capacity back to the market,” TIACA said.
“E-commerce demand will continue to be a source of growth but overall, we anticipate a slight reduction in volumes when compared to 2022 with downward pressure on yields based on returning capacity and slower demand,” TIACA added.
Source: Air Cargo News
Vessel schedule reliability improved month-on-month (M/M) in November by 4.7 percentage points, reaching 56.6%. Since the beginning of the year, the average delay for LATE vessel arrivals has also been improving consistently, dropping by -0.58 days M/M to 5.04 days. “Both schedule reliability and average delay are now better than the 2020 level as well,” Sea-Intelligence CEO, Alan Murphy pointed out.
Only two carriers recorded on-time performance above 60%. MSC was the most reliable carrier with 63.4%, followed by Maersk Line with 61.7% reliability. The next 8 carriers recorded schedule reliability of 50%-60%, while 4 carriers recorded schedule reliability of 40%-50%. Yang Ming recorded the lowest schedule reliability of 42.5%.
Source: Sea-Intelligence
Forwarders operating in South China say shippers will face higher freight costs on barge and trucking because of pandemic-related disruptions and the approaching Lunar New Year Holiday.
Most feeder services will be suspended between the hub ports of Hong Kong and Shenzhen and second-tier ports in Southern China around January 16. This is so that mainland Chinese barge crews can complete mandated COVID-19 quarantines before returning home for the Lunar New Year holidays that begin on January 22, 2023.
Several container lines, including CMA CGM and Hapag-Lloyd, have already stopped accepting cargo to certain ports because of the early suspension of barge services. A customer advisory by OOCL stated that barge service would not resume operations until around Feb. 19-23, depending on the destination.
Despite carriers saying cargo destined for one of the gateway ports of Hong Kong, Shenzhen, and Guangzhou would not be affected by the feeder suspension, some carriers have issued notices to customers advising them to change the destination of their cargo from Hong Kong to Shenzhen terminals such as Yantian and Shekou or Guangzhou’s Nansha terminal, and transship from those ports, said Sunny Ho Lap-kee, executive director of the Hong Kong Shippers’ Council.
While Beijing has eliminated quarantine restrictions for cross-border trucking between Hong Kong and China, the measures still apply to barge crews. Ho said that even if quarantine regulations were lifted soon for feeder operators, it would come “a bit too late for carriers, forwarders, and shippers because they have already had to make arrangements for shipments around Lunar New Year”.
The few feeders that continue to operate will be able to charge whatever rate the market will accept, a Hong Kong-based forwarding executive pointed out. As truck and barge capacity tightens from early January onward, rates for cross-border trucking are expected to increase between 30% and 50%.
Meanwhile, forwarders are expecting the trade market to remain slow over the next three months due to low order levels and a surge in COVID-19 cases after China eased its zero-COVID policy.
Source: Journal of Commerce
A slowdown in production typically takes place in the period around the Chinese Lunar New Year (CNY) with shipping lines blanking sailings to balance supply with demand. Yet, despite a market faced with stagnated demand growth and declining freight rates, carriers have not acted to reduce additional capacity during CNY 2023.
Sea-Intelligence data shows the opposite is taking place. When comparing 2023 with both 2019 and the average capacity growth rate of 2015-2019, there is an increase in deployed capacity. “Asia-North America West Coast is seeing capacity growth of 35%-38%, Asia-North America East Coast of a staggering 57%-59%, and Asia-North Europe of 28%-42%. Asia-Mediterranean is the only trade lane that is closer to the pre-pandemic levels,” said Alan Murphy, CEO of Sea-Intelligence.
Sea-Intelligence warns the capacity reductions may not come quickly enough, setting the stage for even more price competition as volumes decline during and after the Chinese New Year. “Despite falling demand, deployed capacity during CNY 2023 is slated to be higher than the deployed capacity in 2021, where demand was absolutely surging. If demand continues to be sluggish, or outright contracts, given these capacity levels, freight rates will continue to tumble,” said Murphy.
“With the shipping lines sitting on piles of cash, further helped by a highly profitable Q3, we might end up in a situation where there is another price war, reminiscent of the one we saw in 2015-2016,” he warned.
Source: Sea-Intelligence
