If you’re in the business of importing, exporting, sourcing, or anything else that requires you to use international shipping lines, then you might be a little stressed this holiday season.
If you're in the import/export business, you've probably noticed shipping costs have been on the rise over the past few years. Port congestion, container shortages, and the ongoing effects of COVID-19 have all contributed to soaring freight rates around the world.
The global shipping industry is under enormous pressure and there's no sign of relief anytime soon. So what's driving these increases, and what can importers do to protect themselves?
COVID-19 disrupted supply chains in ways that are still being felt today. Factory closures, reduced port staffing, and a massive surge in consumer demand for goods (while services were unavailable) created a perfect storm for shipping costs.
When factories shut down in early 2020, shipping containers piled up at ports. When production resumed, there was suddenly a massive backlog of goods to ship, but not enough containers in the right places. Container repositioning takes time, and the mismatch between supply and demand drove container rental prices to record highs.
Port congestion has compounded the problem. With more ships arriving than ports can handle, vessels are waiting days or weeks to berth. This extends transit times and ties up containers for longer, reducing effective supply and pushing costs up further.
Major ports in the US, Europe, and Australia have all experienced significant congestion. The knock-on effect is felt throughout the supply chain, from factory to warehouse.
While you can't control global shipping markets, there are steps you can take to manage costs and reduce risk:
Plan further ahead. The days of placing an order and expecting delivery in four weeks are over for now. Build longer lead times into your planning.
Consider air freight for urgent orders. Yes, it's expensive, but if you're facing a stockout, the cost of air freight may be less than the cost of lost sales.
Work with a freight forwarder. A good freight forwarder has market knowledge and relationships that can help you find capacity and manage costs. They can also advise on consolidation options.
Review your inventory management. Higher safety stock levels make sense when supply chains are unpredictable. Holding more inventory costs money, but running out of stock costs more.
Need help navigating the current shipping environment? Book a consultation with the Epic Sourcing Australia team today.
.png)
