Have you noticed prices are going up these days? Well here is a big unseen part of the story why:
Introduced in 1956 containers changed the world! The consumer boom of the 1960s was fuelled by access to overseas products in such quantities and frequency that would not have been possible with traditional shipping techniques used before their introduction.
The containers allow goods to be packed at factories into standard size steel boxes of 20 to 40 feet in length reducing laborious loading and unloading and significant product damage. They are then and hoisted by cranes onto ships, rail cars, and trucks and finally end up in countries often on the other side of the world ready to be unloaded bringing a huge variety of goods to the ultimate consumer
Once the containers are emptied in North America, they are refilled with a variety of goods such as soya beans and grains (helping to drive NA farming) destined, for example, the Far East or Europe creating a magic roundabout of a flow of goods that service the population of the world.
A glitch or a hitch in this cycle can create havoc and just about always means delays and extra cost. These costs and delays to market all get passed down the supply chain and ultimately the end-user.
Everyone is now as bored with hearing about the pandemic, but, the pandemic has had a huge impact on the smooth transportation of goods, and as such MASSIVE cost increases in transport costs. It's REAL and it's NOW.
- Huge increase in exports from China at the beginning of the pandemic such as masks, PPE, Disinfectant, etc. This created a shift in global container availability.
- Mega ships full of containers stuck in floating traffic jams unable to unload, these traffic jams are still with us and getting worse! The jams last often for weeks creating a shortage of containers due to longer cycle times.
- Ports can’t cope with the backlog, dock workers & truck drivers cant work efficiently due to restrictions.
- Factories are becoming warehouses as the manufactured product can’t leave.
- A huge shift in consumer demands as lifestyles and habits have changed due to home working and confined exercise.
There are loads of facts and figures all over the Internet but suffice to say the impacts are in the billions of dollars. For example, to ship a container 6 months ago from China to the USA was 2500$ now its 6-7000$. An increase of x2.5 in the cost for a container transit.
Long gone are the days when we could get ocean transit to Montreal in 35 days from India– it's NOW 90 days! Many importers did not plan for this curveball, which essentially just crept up on everyone in retail, have you notice just how much stuff is out of stock these days!
Check out this excerpt from an article found in the New York Times March 06 2021:
“ Baum-Essex, uses factories in China and Southeast Asia to make umbrellas for Costco, cotton bags for Walmart and ceramics for Bed Bath & Beyond. Six months ago, they were paying about $2,500 to ship a 40-foot container to California. They just paid $6,000USD to $7,000 USD. This is the highest freight rate that seen in 45 years in the business.
In early September 2020, they waited 90 days to secure space on a ship for a container of wicker chairs and tables."
Another U.S. importer, Highline United, which imports women’s shoes from China and Hong Kong for brands like Ash and Isaac Mizrahi, is paying more than five times its usual price for shipping.
Major consumer brands — from the sportswear-maker Under Armour to Hasbro, the game and toymaker — have been dealing with shipping bottlenecks.”
This hugely impacts the supply chain planning process and why many of our shelves are bare.
Is there a way to get items into stores quicker? Yes but… airfreight is roughly eight times the cost of sea shipment. Most airfreight is carried in the cargo holds of passenger jets. With air travel severely constrained, so are available cargo slots. SCARY isn’t it?
None of us know the time it will take for the world to get back to a regular beat, but one thing is for sure it will be a new beat. Containers will be scarce until 2022 and as that classic well-worded Bob Dylan song goes “Times they are a changin”.
Until the world settles to its new beat, please try and be patient those containers will arrive, hopefully, sooner rather than later.