Latest update: 30 March 2022
While new COVID surges force major ports like Shanghai into lockdown, the Ukraine-Russia conflict continues without a clear ending. The current developments have pushed organizations further into unknown territory where the fragility of globalization is at a new threshold. The exact future implications remain mostly unpredictable even if their impact is already felt by consumers in parts of the world: inflation and visible shortages of goods.
So what do these new challenges and shifts in global business mean for the already present Global Supply Chain Crisis? Read on for a short overview, including the steps Dekkers is taking to ensure that clients are prepared, and their orders follow the fastest and safest route.
Clients at Dekkers can rest assured that there are no new implications for their existing orders. By keeping a close eye and approaching each order case-by-case, orders can be fulfilled accordingly.
Recommendations for existing clients and potential new orders
- Plan ahead: 3 to 4 weeks buffer in planning ensures enough room for deviance.
- Talk to your specialist: ask for advice on transportation and packaging options.
- Adjust strategy: go for premium quality and a less-is-more approach for maximum ROI.
Overview crisis: congestion improvements overshadowed
The beginning of 2022 gave some hope to the possible improvement of the unprecedented crisis (explained in the previous update), which resulted in shortages of essential goods, unseen high tariffs and global blockages at ports and roads. With slight improvements in container backlog at the beginning of this year, the expected extra lead time dropped by on average five days. However, as multiple media and supply chain experts predict, the war in Ukraine and China's Covid lockdowns threaten slower recovery and faster inflation across the global economy.
"With the recent developments of the lockdowns in China and the Ukraine-Russia conflict, the original Global Supply Chain Crisis we were keeping an eye on holds new challenges ahead. Last year's developments already led industries to question the resilience of globalization, especially for industries like tech or for ensuring the availability of daily essential consumer goods. As a result, organizations looking into local production and reshoring are common topics on the agenda. " - Connor van den Berg, Logistics specialist at Dekkers.
Zooming in: America's truckload demand challenge
In America specifically, although the ports still need to cope with the backlog, the more significant bottleneck remains inland transportation. The predictions on how the crisis will develop for 2022 largely depend on truckload demand. The question remains if the higher prices will push down demand to the degree that the backlog can ease or if demand remains and possible COVID surges pop up, causing the already fragile system to get paralyzed. (more information: Flexport)
Europe ports - the calm before the storm?
In Europe, the congestion at ports continues with slight improvements in lead times. However, the original rail transportation routes could be diverted to sea because of the Ukraine-Russia conflict. This ongoing conflict would put an additional strain on the recovering system. Furthermore, the reliance on essential resources and components from the conflicting countries causes a more significant problem if the war continues. If no improvements are going forward, shortages in raw materials and sanctions will continue to drive prices upwards.
China's zero-COVID strategy: temporary or the last drop?
Due to the current lockdowns in China and their strict new zero-Covid strategy related to the uprise of the Omicron variant, all are watching to see how long this wave will push factories to close and measures to tighten daily businesses. Nevertheless, some improvements were noted as factory production within Shenzhen partially resumed, and Dongguan slowly resumed normal operations. These improvements leave hope that the Omicron wave's impact is shorter and could be solved faster by the prompt reaction of the Chinese government. However, if the strict policies continue, congestion and shipping days between major routes will inevitably increase.
In general, the effect is still felt less for current orders. Trucking shortages due to strict COVID rules and closed routes to and from the ports are still the biggest challenge for several ports. The staff working inside the port have created a "closed-loop production" unit to keep the 24hr port of Shanghai running for now (Wall Street Journal).
What are we at Dekkers doing to ensure the best service for clients?
Our logistics team keeps a close eye on developments to ensure clients are informed, and their existing orders are tracked closely. Furthermore, we follow the following structure:
- A specialized case-by-case approach for each order.
- The project management team, including the logistics manager, map out the most beneficial route for the client.
- Options are transparently communicated and decided upon with the client and partners involved.
- We consolidate orders or pack them more smartly to win time or cut costs. The logistics specialist advises on order quantities to find the most efficient and sustainable way to ship orders out.
- Each client gets live updates on progress and tracking
- Orders are booked more in advance
Resources and further reading:
Flexport: Freight Market Update March 22nd, 2022 update
Wall Street Journal: How Sanctions on Russia, War in Ukraine and Covid in China Are Transforming Global Supply Chain
Economic Times: Global supply lines brace for 'menacing' economic storm to widen
BBC.com: China: How is its zero-Covid strategy changing?