Navigating the Global Equipment Shortage: Strategies for Supply Chain Resilience

Introduction: The Perfect Storm in Global Logistics

As we approach the end of 2020, a new challenge has emerged in the global supply chain: a critical shortage of shipping containers. This scarcity is causing significant disruptions, including soaring freight rates and shipment delays. The situation is the result of a "perfect storm" of factors, including record volumes, port congestion, insufficient chassis supplies, and the ongoing impact of COVID-19.

At FreightAmigo, we understand the complexities of this situation and its impact on businesses worldwide. In this article, we'll delve into the root causes of the equipment shortage, its effects on different trade lanes, and most importantly, strategies to help you navigate these turbulent times.

Understanding the Equipment Shortage

The current container shortage is most severe at Asian ports, particularly in China, Vietnam, and India. The scarcity is especially pronounced for 40-foot high cube and standard containers. Paradoxically, in some instances, securing vessel space is easier than obtaining the necessary equipment.

This shortage has led to a situation where ships are sometimes sailing with empty slots, not due to lack of demand, but because of equipment unavailability. This unprecedented scenario underscores the severity of the current crisis in global logistics.

Root Causes of the Equipment Shortage

Several factors have contributed to the current equipment shortage:

• Demand Fluctuations: The year began with high demand, followed by a sharp drop as the pandemic spread. This led carriers to believe they had a surplus of equipment, reducing the urgency to order new containers.
• Leasing Opportunities Vanished: The market conditions made it difficult to lease additional containers.
• Container Lifecycle: Approximately 6-8% of containers are scrapped each year due to age, further reducing available stock.
• Resurgence in Demand: As demand rebounded later in the year, the industry found itself with fewer available containers than at the start of 2020.

Impact on Different Trade Lanes

The equipment shortage is not affecting all trade lanes equally. Carriers are prioritizing based on yield, which varies significantly across different routes. Factors influencing the impact include:

• Container dwell time
• Demand and price for exports at the destination
• Port congestion
• Type of contract a shipper has

For instance, rates to Europe are expected to increase significantly in the near future. This variability in impact across trade lanes adds another layer of complexity for businesses trying to manage their supply chains effectively.

Port Congestion: A Compounding Factor

Adding to the equipment shortage, many ports worldwide are experiencing severe congestion. This includes major ports in the United States, Canada, Australia, New Zealand, and the United Kingdom. As a result, vessels are facing significant delays, sometimes exceeding 10 days.

This congestion creates a vicious cycle: containers that should be unloaded and ready for their next journey are instead sitting on ships, waiting for berths to become available. This further exacerbates the equipment shortage, as containers are not being efficiently cycled through the system.

Carrier Responses and Their Impact

In response to these challenges, ocean carriers have taken several steps:

• Prioritizing by Yield: Carriers are focusing on the most profitable routes and customers.
• Rejecting Certain Bookings: Some US and EU export bookings are being declined, especially those requiring additional free time or having very long transit times.
• Empty Container Repositioning: Carriers are shipping empty containers back to Asia faster to alleviate the shortage in key export markets.

While these measures may help carriers manage their operations, they can create additional challenges for shippers, particularly those in markets with lower yields or those requiring specialized shipping arrangements.

Strategies for Navigating the Equipment Shortage

At FreightAmigo, we believe in empowering our clients with knowledge and solutions. Here are four strategies we recommend for keeping your supply chain moving during these challenging times:

1. Explore Alternative Container Types

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

• 20-foot containers: These are often available in most areas and can be a suitable alternative for smaller shipments.
• 45-foot containers: In some locations, these larger containers may be an option, particularly for businesses with higher volume needs.
• Non-operating reefers (NORs): These are essentially dry reefer containers that can be used for cargo not requiring refrigeration. They offer an innovative solution when standard dry containers are scarce.

2. Consider Loading at Larger Ports

Larger ports often have better equipment availability due to their position in the shipping network. Empty containers typically arrive at major ports before being distributed to smaller locations via feeder vessels. Consider these alternatives:

• Choose Shanghai over smaller Yangtze river ports like Nantong or Wuhu
• Opt for Shenzhen instead of Guangzhou (including Huangpu, Zhongshan, etc.)

While this may require additional inland transportation, it could significantly reduce your overall transit time and improve container availability.

3. Utilize Premium Ocean Services

Many carriers and freight forwarders now offer premium services that guarantee equipment availability at origin. These services may come at a higher cost but can provide peace of mind and ensure your goods are shipped on schedule. At FreightAmigo, we offer various premium options to meet your specific needs and budget.

4. Consider LCL Shipping

Less than Container Load (LCL) shipping can be an excellent alternative during equipment shortages. By consolidating your cargo with other shippers, you can take advantage of shared container space. This option not only helps mitigate the impact of container shortages but can also be more cost-effective for smaller shipments.

At FreightAmigo, we offer a robust LCL network spanning hundreds of nodes across the world, providing you with flexible and reliable shipping options even in challenging market conditions.

The Road Ahead: What to Expect

While the current equipment shortage is severe, it's not expected to last indefinitely. However, recovery will take time. Container manufacturers are currently overwhelmed with orders and are sold out through the beginning of 2021. This suggests that the shortage may persist well into the new year.

As we navigate these turbulent times, it's crucial for businesses to stay informed, be flexible, and work closely with their logistics partners to find innovative solutions. At FreightAmigo, we're committed to providing you with the latest insights and tailored solutions to help you overcome these challenges.

How FreightAmigo Can Help

As a full-service, one-stop digital supply chain finance platform, FreightAmigo is uniquely positioned to help you navigate these challenging times. Our Digital Logistics Platform combines artificial intelligence, big data, FreighTech, FinTech, InsurTech, and GreenTech to accelerate logistics, information, and cash flow, ensuring a hassle-free and enjoyable logistics experience.

Here's how we can support you in overcoming the current equipment shortage:

• Comprehensive Quote Comparison: Compare door-to-door freight quotes for international courier, airfreight, sea freight, rail freight, and trucking solutions, and book online with ease.
• Real-Time Tracking: Keep tabs on your shipment status anytime, anywhere, with our platform connecting to more than 1000+ reputable airlines and shipping lines.
• One-Stop Solutions: Arrange customs clearance, cargo insurance, and trade finance all in one place, simplifying your logistics process.
• Document Automation: Our system automates shipment documents, reducing paperwork and potential errors.
• 24/7 Expert Support: Our logistics experts are available round the clock to assist you with any queries or concerns.

By leveraging our Digital Logistics Solution, you can mitigate the impacts of the equipment shortage and ensure your supply chain remains resilient and efficient.

Conclusion: Staying Agile in a Changing Landscape

The global equipment shortage presents significant challenges for businesses worldwide. However, with the right strategies and partners, these obstacles can be overcome. By exploring alternative container types, considering different loading ports, utilizing premium services, and leveraging LCL shipping, businesses can maintain the flow of their supply chains even in these turbulent times.

At FreightAmigo, we're committed to helping you navigate these challenges. Our Digital Platform provides you with the tools, insights, and support you need to make informed decisions and keep your business moving forward. As we continue to expand our footprint and ecosystem globally, we're creating new paths for businesses and individuals to grow and ship, regardless of market conditions.

Remember, in the world of global logistics, adaptability is key. Stay informed, be flexible, and don't hesitate to seek expert advice. With the right approach and support, you can turn these challenges into opportunities for growth and innovation in your supply chain management.