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Monday, May 16, 2022

Maritime Logistics Professional

Coping with shifting cargo patterns will take some doing

Posted to Far East Maritime (by on November 18, 2010

It appears that the whole notion of shipping a bunch of stuff just in time to make some big shopping extravaganza is changing.

In previous years the peak season for shipping out of Asia was around August to October. Huge volumes of containers left busy China ports and sailed off on full vessels for Europe and the US.

Container lines slapped on hefty peak season charges, congestion charges and bunker surcharges as they steamed for distant ports and were not shy of rolling cargo.

But this year was different. If there was a peak season it lasted for half the year, stretching out demand. It caught the lines by surprise but enabled them to bring in capacity from lay up so that by the end of September carriers were reporting record volumes and seriously improved freight rates.

The recession is now over and the recovery appears to be holding, so by next year the world will be back to normal and the old trading patterns will resume. Or will they?

The crisis gave retailers across the world not so much a wake up call as a dash of ice cold water to the face. Inventory levels maintained before the financial meltdown were radically reduced and retailers now believe they can manage with less stock on hand.

It is a dangerous position to be in with a very real risk of stock outs should there be sudden consumer demand, but with consumer behaviour so unpredictable companies would rather risk empty shelves than tie up cash in inventory.

The problem with this approach is that it pushes all the risk back into the supply chain. Sudden demand will mean urgent orders with all the pressure that comes from compressing cycle times. Just-in-time is basically storing goods within your supply chain, but it works on a planned basis, not with emergency replenishment orders.

However, there is a good side to all this. With the inventory rebuilding now complete, if consumer demand increases in the big western markets it will immediately generate new orders from Asian factories. That raises the risk of boom and bust cycles, but if shipping lines can keep closer tabs on demand than they have in the past and ensure there is enough supply to meet any unexpected rise in business, then we will be in good shape.

So all we need is for consumers to begin consuming, and then we can finally turn the page on this annoying period in history.

Tags: shipping dredging Sea budget AAPA Short