COVID created a surge in market demand for goods and ocean forwarders, which has not let up since. This demand and disruption will likely continue rising for the unforeseeable future. This surge has created congestion in the shipping industry and ocean freight logistics, leading to high rates and delayed shipments.
McKinsey & Company dug into the supply chain’s realities as the Shanghai lockdown continued in late March 2022. Their findings show that the lockdown is causing such a disruption that the ramifications will affect China’s internal economy and the rest of the shipping industry. All ocean freight shipping parties need to know a few things about the top four drivers of continued rate instability throughout the rest of the year.
The Shanghai Lockdown Has Triggered Another Strain on Container Capacity
With the COVID lockdown of Shanghai, there has been a shipping container traffic jam at the largest port in China. Frozen food and chemicals sit in containers as truckers cannot get to the freight due to virus testing requirements.
The lockdown has created delays in ocean freight shipping. It also has created a trucker shortage and warehouse closures in two provinces, Zhejiang and Jiangsu, that provide one-third of China’s exports. The backlog and congestion undoubtedly contribute to a chain reaction of delays and increased freight charges throughout the shipping industry.
The North American Import Boom Is Continuing
Over the past two years, North America has seen a larger than average demand for imports. McKinsey & Company data shows that import volumes in North America show an increase of 20% between 2019 and 2021. This increase in demand growth comes when ocean forwarders, equipment, and port capacity are short supply. Sea freight forwarders must assume that the current issues will remain the norm.
The Labor Shortage Also Is Affecting the Ability to Manage North American Imports
Another result of the pandemic is a mass labor shortage across all areas, including sea freight forwarders. This affects the management of imports, sea freight forwarding, and ocean freight logistics. Offering increased salaries is an option that many sea freight forwarders have implemented to incentivize potential employees.
Since the onset of COVID, many people have adjusted to working from home and have realigned their priorities, many wanting more work-life balance. Even with these offers of higher than ever salaries for sea freight forwarding, the labor shortage is still a significant problem in ocean freight shipping.
Uncertainty Has Made Contracting Transportation for 2022 Even More Complex
The ongoing pandemic’s uncertainty and labor shortages have created a complex situation for ocean forwarders, ocean freight shipping, and contracting. Ocean forwarders often work under contracts, although they are far more expensive than past years. Shippers should think about the worth of the contents in the container and the economic trade-offs between high rates and supply-chain disruptions to reach a balance.
With the current complexity and uncertainty in the ocean freight shipping industry, an enforceable and firm contract should be implemented to create a more stabilized situation. To enforce a contract, shippers need to sign strict take-or-pay agreements for assurances that capacity will be available from ocean carriers and forwarders.
Less Is a Whole-Lot More for Ocean Freight Forwarders That Need to Reduce Back-Office Strains and Maximize Throughput
With the current freight market congestion, ocean freight forwarders are under unprecedented pressure. The “new normal” remains across the supply chain industry, as ocean forwarders strive to create better Freight forwarding services and increase revenues.
It is necessary to stay in the know of the uncertainties and happenings that impact freight forwarding and remain responsive and agile in the face of the unknown. Ocean forwarders should implement the use of technology and back-office programs to help your business tremendously. Using automated management reduces tedious work and maximizes throughput. This technology can track cargo, share timelines and updates in real-time, streamline data input and management, and automates scheduling.
Boost Your Ocean Freight Shipping Strategy With Cargologik
An increase in market demand for ocean freight shipping is here to stay. With the labor shortage, booming import demand in North America, and uncertainties in contracts, the shipping industry is at an all-time high. Your shipping strategies do not have to be one of these complexities. Sign up with Cargologik and boost your ocean freight shipping strategy today.