Navigating the Global Equipment Shortage: Strategies for Supply Chain Success

Understanding the Current Supply Chain Landscape

As we approach the end of 2020, businesses involved in international trade are facing yet another challenge: a significant shortage of shipping containers at key Asian ports. This scarcity is causing a ripple effect throughout the global supply chain, resulting in increased freight rates and shipment delays. To help our clients navigate these turbulent waters, we at FreightAmigo have compiled an analysis of the situation and offer practical solutions to keep your supply chain running smoothly.

The Perfect Storm: Factors Contributing to the Equipment Shortage

Several factors have converged to create the current container shortage:

• Record shipping volumes
• Port congestion
• Insufficient chassis supplies
• COVID-19 related disruptions

The shortage is particularly acute for 40-foot high cube and standard containers at major Asian ports, including those in China, Vietnam, and India. Interestingly, in some cases, securing vessel space has become easier than obtaining the necessary equipment to fill that space.

Root Causes of the Container Crisis

To understand the current situation, we need to look back at the beginning of 2020. The year started with high demand, but as the pandemic spread, demand dropped significantly. This led carriers to believe they had a surplus of equipment, reducing the urgency to order new containers. Additionally, the opportunities to lease containers diminished.

Another factor contributing to the shortage is the natural lifecycle of containers. Each year, approximately 6-8% of containers are taken out of service due to age and wear. Consequently, when demand began to recover, the industry found itself with fewer available containers than at the start of the year.

The Impact on Global Trade Routes

The equipment shortage is not affecting all trade routes equally. Carriers are prioritizing based on yield, which varies depending on factors such as:

• Distance of the trade route
• 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 highlights the complexity of the global shipping landscape and the need for adaptive strategies.

Port Congestion: A Compounding Factor

Adding to the equipment shortage, many ports worldwide are experiencing severe congestion. This includes ports in the United States, Canada, Australia, New Zealand, and the United Kingdom. As a result, vessels are facing delays of up to 10 days or more before reaching their designated ports. This situation further exacerbates the container shortage, as containers that should be unloaded and returned to circulation are instead sitting idle on delayed ships.

Carrier Responses and Market Adaptations

In response to the equipment shortage, ocean carriers have taken some drastic measures. Some have stopped accepting certain U.S. and EU export bookings, particularly those requiring additional free time or having very long transit times. Instead, they are opting to ship empty containers back to Asia to reposition them faster. While this strategy may help alleviate the shortage in key Asian ports, it creates additional challenges for exporters in other regions.

FreightAmigo's Solutions: Keeping Your Supply Chain Moving

At FreightAmigo, we understand the critical importance of maintaining a fluid supply chain, even in the face of global challenges. We've developed several strategies to help our clients navigate the current equipment shortage:

1. Explore Alternative Container Types

While 40-foot containers are in short supply, other options are still available. We can help you explore the use of:

• 20-foot containers, which are more readily available 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 non-refrigerated cargo

2. Strategic Port Selection

Larger ports often have better equipment availability due to their position in the supply chain. We can assist you in adjusting your shipping strategy to leverage these advantages. For example:

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

3. Premium Ocean Services

FreightAmigo offers premium guaranteed services on sailings out of Asia. These services can ensure equipment availability at origin, providing a reliable solution for time-sensitive shipments.

4. Less Than Container Load (LCL) Shipping

By consolidating your cargo with other shippers, LCL services can help you overcome equipment shortages while potentially reducing costs. Our extensive LCL network spans hundreds of nodes across the world, offering flexibility and reliability.

Leveraging FreightAmigo's Digital Platform for Supply Chain Resilience

In these challenging times, having a robust Digital Logistics Platform is more crucial than ever. FreightAmigo's comprehensive Digital Logistics Solution offers several advantages:

Real-Time Quote Comparison

Our platform allows you to compare door-to-door freight quotes for various shipping methods, including international courier, airfreight, sea freight, rail freight, and trucking solutions. This feature enables you to find the most cost-effective and available options quickly.

Global Shipment Tracking

With connections to over 1000 reputable airlines and shipping lines, our tracking system keeps you informed about your shipment status anytime, anywhere. This visibility is crucial when dealing with potential delays and equipment shortages.

Integrated Customs and Insurance Services

Our one-stop platform streamlines the process of arranging customs clearance and cargo insurance, reducing the complexity of international shipping during these challenging times.

Automated Documentation

By automating shipment documents, we help reduce errors and save time, allowing you to focus on strategic decision-making in response to market challenges.

24/7 Expert Support

Our team of logistics experts is available around the clock to provide guidance and solutions, helping you navigate the complexities of the current shipping landscape.

Looking Ahead: The Future of Container Availability

While the current equipment shortage is severe, it's not expected to last indefinitely. However, container manufacturers are currently overwhelmed with orders and are sold out through the beginning of 2021. This suggests that the shortage may persist for several more months.

As we move forward, it's crucial for businesses to stay informed about market conditions and remain flexible in their shipping strategies. By leveraging the power of Digital Logistics Solutions like FreightAmigo, companies can enhance their supply chain resilience and adapt more effectively to market fluctuations.

Conclusion: Adapting to the New Normal in Global Shipping

The global container shortage presents significant challenges for businesses engaged in international trade. However, with the right strategies and tools, it's possible to maintain an efficient and resilient supply chain. At FreightAmigo, we're committed to providing innovative Digital Logistics Solutions that help our clients navigate these turbulent times.

By exploring alternative container types, strategically selecting ports, utilizing premium services, and leveraging the power of digital platforms, businesses can mitigate the impact of equipment shortages and keep their supply chains moving. As we continue to face unprecedented challenges in the global shipping industry, adaptability, informed decision-making, and strong partnerships with Digital Logistics Platforms like FreightAmigo will be key to success.

Remember, in the world of global logistics, challenges often bring opportunities for innovation and growth. By staying agile and leveraging cutting-edge Digital Logistics Solutions, your business can not only weather the current storm but emerge stronger and more competitive in the evolving landscape of international trade.