Navigating the Global Equipment Shortage: Strategies for Supply Chain Resilience

Introduction: The Perfect Storm in Global Shipping

As we approach the end of 2020, the global supply chain faces yet another significant challenge: a severe shortage of shipping containers. This scarcity is causing ripple effects throughout the logistics industry, leading to skyrocketing freight rates and substantial shipment delays. The situation has arisen from a perfect storm of factors, including record-breaking volumes, port congestion, insufficient chassis supplies, and the ongoing impact of the COVID-19 pandemic.

In this article, we'll delve into the current state of the container shortage, its root causes, and most importantly, how businesses can navigate these turbulent waters. We'll also explore how FreightAmigo's Digital Logistics Platform can support freight forwarders and shippers in adapting to these unprecedented market conditions.

The Current State of Affairs: A Global Equipment Crunch

The container shortage is most acutely felt at Asian ports, particularly in China, Vietnam, and India. Major carriers are struggling to meet demand, especially for 40-foot high cube and standard containers. This equipment scarcity has created a paradoxical situation where, in some instances, securing vessel space is easier than obtaining the necessary containers.

Jan Hinz, Flexport Head of North American Ocean Freight, highlighted the severity of the situation in a statement to FreightWaves: "We have heard anecdotal reports out of Asia that some ships are sailing with open slots simply because there is no equipment—even though there's demand to fill the containers."

This shortage is not just a minor inconvenience; it's a major disruption to global trade flows. Businesses across various sectors are feeling the pinch, facing increased costs and potential delays in their supply chains. Understanding the depth of this crisis is crucial for developing effective strategies to mitigate its impact.

Unraveling the Causes: How Did We Get Here?

The current container shortage is the result of a complex interplay of factors that have been brewing throughout 2020. Let's break down the key elements that have contributed to this crisis:

1. Demand Volatility

The year began with high demand, but as the COVID-19 pandemic spread globally, demand dropped sharply. This initial decline led carriers to believe they had a surplus of equipment, reducing the urgency to order new containers. However, when demand rebounded unexpectedly, the industry found itself unprepared.

2. Reduced Container Production

The perceived surplus of containers at the beginning of the year led to a slowdown in new container production. Additionally, opportunities to lease containers vanished, further exacerbating the shortage when demand suddenly increased.

3. Natural Attrition

Containers have a finite lifespan, with approximately 6-8% being scrapped each year due to age and wear. This natural attrition, combined with reduced production, meant that the total available container pool was smaller than at the start of the year.

4. Port Congestion

Many ports worldwide, including those in the US, Canada, Australia, New Zealand, and the UK, have been experiencing severe congestion. This has led to significant delays in vessel arrivals, sometimes exceeding 10 days. As a result, containers that should be available for unloading are stuck on ships waiting for berths, further reducing the available equipment pool.

5. Imbalanced Trade Flows

To address the equipment shortage, some ocean carriers have stopped accepting certain US and EU export bookings, particularly those requiring additional free time or having very long transit times. Instead, they're shipping empty containers back to Asia to reposition them faster. While this may help alleviate the shortage in Asia, it creates additional challenges for exporters in other regions.

The Impact on Global Trade

The container shortage has led to a significant increase in freight rates across various trade lanes. While not all routes are affected equally, the impact is widespread and substantial. For instance:

• Rates from Asia to the US West Coast have seen dramatic increases.
• Europe-bound shipments are expected to face significant rate hikes in the near future.
• Even traditionally stable routes are experiencing unprecedented volatility.

These rate increases are not just numbers on a spreadsheet; they represent real challenges for businesses trying to maintain their supply chains and profit margins. The situation is particularly difficult for smaller businesses that may not have the negotiating power or financial resources to absorb these increased costs.

Moreover, the equipment shortage is causing delays and disruptions that ripple through entire supply chains. Products may arrive late to market, causing stockouts and lost sales opportunities. Just-in-time manufacturing processes are being thrown into disarray, forcing companies to rethink their inventory strategies.

Strategies for Navigating the Storm

While the current situation presents significant challenges, there are strategies that businesses can employ to keep their supply chains moving. Here are some alternative solutions to consider:

1. Explore Alternative Container Types

While 40-foot containers are in short supply, other options may be more readily available. Consider using:

• 20-foot containers, which are generally more accessible in most areas
• 45-foot containers, which can be a good choice in certain locations
• Non-operating reefers (NORs) - dry reefer containers that can be used for cargo not requiring refrigeration

2. Optimize Port Selection

Larger ports often receive empty containers before smaller, feeder ports. Consider loading at major hubs where equipment availability is likely to be better. For example:

• Choose Shanghai over smaller Yangtze river ports like Nantong or Wuhu
• Opt for Shenzhen instead of Guangzhou or other Pearl River Delta ports

3. Utilize Premium Ocean Services

Some carriers and freight forwarders offer premium services that guarantee equipment availability at origin. While these services may come at a higher cost, they can provide certainty in uncertain times.

4. Consider LCL Shipping

Less than Container Load (LCL) shipping can be an effective alternative, especially for smaller shipments. By consolidating cargo from multiple shippers, LCL services can often secure equipment more easily than individual FCL shipments.

5. Diversify Suppliers and Sourcing Locations

If possible, consider diversifying your supplier base and sourcing locations. This can help spread the risk and increase the chances of finding available equipment in different regions.

6. Plan Ahead and Book Early

Given the current market conditions, planning ahead is more crucial than ever. Book your shipments as early as possible to secure both space and equipment.

7. Stay Informed and Flexible

Keep abreast of market conditions and be prepared to adjust your strategies as needed. Flexibility in routing, timing, and even product mix can help navigate the challenges.

How FreightAmigo Can Help

In these challenging times, having a reliable Digital Logistics Platform is more crucial than ever. FreightAmigo offers a comprehensive suite of solutions designed to help businesses navigate the complexities of the current market:

1. Real-Time Quote Comparisons

Our platform allows you to compare door-to-door freight quotes for various modes of transport, including international courier, airfreight, sea freight, rail freight, and trucking solutions. This feature enables you to quickly identify the most cost-effective and available options in the current volatile market.

2. Global Shipment Tracking

With connections to over 1000 reputable airlines and shipping lines, FreightAmigo provides real-time tracking of your shipments. This visibility is crucial when dealing with potential delays and equipment shortages.

3. Integrated Customs Clearance and Insurance

Our one-stop solution includes arranging customs clearance and cargo insurance, streamlining your logistics processes and reducing the risk of further delays.

4. Automated Documentation

In a market where efficiency is key, our automated shipment documentation feature can save you valuable time and reduce errors.

5. 24/7 Expert Support

Our team of logistics experts is available round-the-clock to help you navigate the challenges of the current market, offering advice on alternative routes, container types, or shipping methods.

6. Access to a Wide Network

As a Digital Logistics Platform with a presence in Hong Kong, Mainland China, and Singapore, FreightAmigo can provide access to a wide network of carriers and services, increasing your chances of securing equipment and space.

7. Data-Driven Insights

Our platform leverages artificial intelligence and big data to provide valuable insights into market trends, helping you make informed decisions about your shipping strategies.

Looking Ahead: The Future of Container Shipping

While the current equipment shortage is severe, it's not expected to last indefinitely. However, relief may not come immediately. According to industry reports, container manufacturers are currently overwhelmed with orders and are sold out through the beginning of 2021.

This situation underscores the need for businesses to adopt more resilient and flexible supply chain strategies. The global pandemic has exposed vulnerabilities in just-in-time inventory models and highlighted the importance of visibility and agility in logistics operations.

As we move forward, we can expect to see:

• Increased investment in container production to meet demand
• Greater adoption of Digital Logistics Platforms to enhance visibility and flexibility
• More focus on diversifying supply chains and sourcing locations
• Innovation in container design and usage to maximize efficiency
• Potential shifts in global trade patterns as businesses adapt to new realities

The current crisis, while challenging, also presents opportunities for businesses to reassess and optimize their supply chain strategies. Those who can adapt quickly and leverage Digital Logistics Solutions will be better positioned to thrive in the evolving global trade landscape.

Conclusion: Resilience in the Face of Adversity

The global container shortage is a complex challenge that requires a multifaceted approach. While the situation may seem daunting, it's important to remember that solutions are available. By staying informed, being flexible, and leveraging Digital Logistics Platforms like FreightAmigo, businesses can navigate these turbulent waters and emerge stronger.

As we've explored in this article, strategies such as exploring alternative container types, optimizing port selection, and utilizing premium services can help mitigate the impact of the equipment shortage. Moreover, the power of Digital Logistics Solutions in providing visibility, efficiency, and adaptability cannot be overstated in these uncertain times.

At FreightAmigo, we're committed to supporting our clients through these challenges. Our comprehensive Digital Logistics Platform is designed to provide the tools and insights needed to make informed decisions and keep supply chains moving, even in the face of unprecedented challenges.

Remember, while the current situation is difficult, it's also temporary. By adopting resilient strategies and embracing Digital Logistics Solutions, businesses can not only weather this storm but also position themselves for success in the post-pandemic world of global trade.

We invite you to explore how FreightAmigo can support your logistics needs in these challenging times. Together, we can turn adversity into opportunity and pave the way for a more resilient and efficient future in global logistics.