RE-SHAPE YOUR SUPPLY CHAIN NOW!

container ship

SEA CONTAINER RATES WON’T BE BACK ON PRE-CRISIS LEVEL

STRATEGIES TO RE-SHAPE YOUR SUPPLY CHAIN

Q3 RATE LEVEL ON MAJOR TRADES

Based on contracted rates with Shipping Lines we have reached another all-time-high in the sea container market. Compared to Q2 especially Central East Asia to North America East Coast shows a high increase of 130% reaching roughly 10K USD per 40Ft Container. The other 2 extremes we are seeing are NAEC to NWEU which increased by 49% and SAEC to NAEC which increased by 35%. All other trades are below those numbers. If you want to receive our quarterly overview on major trades please register for our newsletter or contact us for more information.
world map with trades

GOLD RUSH FEVER?

Profits like never before

The still ongoing imbalance of flows and surge of demand let shipping lines benefit – with profits never achieved before. Drewry estimates an EBIT of 150 bn USD for this industry in 2021.

We are always in touch with Shipping Lines and many NVOs while supporting our customers in their transport procurement process. For big volumes, dealing with shipping lines directly, the communication had been pretty good and we were able to negotiate less increasing rates for our customers than for smaller shippers.

Especially some NVOs seem to be in a gold rush fever as shipper cannot rely on contracted rates in many cases. Transports are declined or only taken for new increases even if they have been contracted some weeks ago.

That said, on the one hand we know that Shipping Lines are also struggling with congestion and capacity issues caused by COVID – doing their best to support their customers. But on the other hand it cannot be denied that the only winners under the current circumstances are the carriers and NVOs.

No real Solutions are brought into place

Congestions amplify the Shortage of Capacity.

The most prominent example is the current congestion of the Los Angeles Area with more than 50 vessel waiting to enter the ports. Many other congestions are reported, e.g. in the UK. Altogether, estimates say that ca. 1/8 of the world fleet is caught in queues.

It seems like the industry is just dealing with the situation, trying to catch up but no real game changers are popping up.

Procurement Managers are mostly occupied with avoiding or minimizing cost increases in all commodities. Supply Chain Planners are trying to re-shape their supply chains but what exactly is the supplier side offering?

Innovative concepts need to be implemented to solve the current situation. E. g. pooling the containers of all shipping lines would help to reduce delays on the inland transports and result in less empty moves protecting the environment as well.

Resilience of Supply Chain vs. End of Business Model

The Resilience of the Supply Chain often discussed these days for some companies is only the tip of the iceberg. In fact for many industries the peak in freight cost endangers their whole business model – not only the ability to deliver.

Now that some expect the crisis not to be over before 2022 many companies have to regionalize their supply chain in order to SURVIVE. In the long run this might backfire.

REVIEW YOUR SUPPLY CHAINS

It is hard to predict when things will get back to normal. Speaking with pundits there is a consensus that the pre-crisis rate level will not be seen any more.

Our recommendation is to proceed with contracting rates in order to secure capacities. Focus on shorter validities and review the rates as you do for bunker adjustments.

Intensify your supplier relationships. Having a procurement process does not mean relationships are not possible. You should have a certain trust into both directions in order to have reliable partners during and after the crisis.

Blog Commodities

Start to re-shape your sourcing strategy!

  • One important decision character would be the value of the goods shipped. By taking into account this factor you can better identify candidates for local sourcing.
  • Analyse your distribution cost from door-to-door including the inland part and compare the total cost to regional sourcing concepts.
  • Take into account your stock-en-route.
  • Optimize your network taking into account your results above

One year ago everybody has been shocked of all things that happened. Our customer survey published in February 2021 has shown that most companies of different industries have not really changed or adapted supply chains at that time. With the tendencies we are seeing today it is not recommendable to wait and hope for better times.

THE FACE BEHIND THE POST

Sabrina Bähr

My name is Sabrina Baehr, I am Co-Founder and Managing Director of OCCON.

In OCCON I am responsible for the strategy, project management, IT development and HR. I have been a hardworking person my whole live, started jobbing when I was 14 years old. My husband says I need a permanent challenging stress level to feel good – I guess he is right 🙂 I am doing my job with a lot of passion and I care about the people who are involved. Planning, organisation and leading our team to successful results are my key competences.

In my private live I am mum of a wonderful daughter who has shown me there is more than work that is worth to be enjoyed. And there is also my husband who can calm me down, helps me to see the positive side of everything and who is supporting us a lot with the OCCON strategy.

Besides my great job I like to travel and I love sports. Since 2019 I am doing crossfit what became a new challenge in my live as it is the heaviest and most painful sport I have ever done but on the other hand the only sport I ever loved so much.

YOU WANT TO LEARN MORE ABOUT US?

Please click here to find out more about OCCON.

YOU LIKE TO COMMENT AND DISCUSS?

You want to comment or discuss anything? Do not hesitate to send us a mail to procurement-blog@occon.de or use the contact section below. Maybe you disagree and like to discuss this as well, do not hesitate. We are Consultants and we are used to be challenged.

Share this post