The scenario is just not anticipated to start out bettering till the primary half of 2023 and that’s having an influence on the automotive business at a time of wider provide chain uncertainty.
Nonetheless, talking at this month’s Automotive Logistics and Provide Chain Europe convention, Philip Damas, Drewry’s managing director, stated there have been contingency measures the automotive business might take. These embody medium-term diversification of elements and materials sourcing, utilizing different ports and suppliers of maritime transport providers, completely different supply routes, in addition to a more in-depth consideration to identify freight charges and weekly congestion indicators.
Port congestion is up throughout all areas of the world, with excessive volumes reported in North America, Asia, Europe and the Center East.
“There was no enchancment globally prior to now 12 months and searching ahead our evaluate is that you must [not] anticipate an unwinding and resolving of port congestion… till the primary half of 2023,” stated Damas.
That state of affairs is determined by a slowdown in demand and a extra disciplined deployment of further ship capability by the carriers. Nonetheless, there nonetheless stay uncertainties referring to gas costs, financial recession and the struggle in Ukraine, amongst others.
Focusing in on the present scenario in container transport between China and the US, Damas stated the common transit instances for loading and unloading between China and each coasts of the US was in a dismal and unpredictable state, with enormous variability, one thing inflicting complications for provide chain planners.
Damas stated an ocean container coming from South China can take anyplace between 20 and 60 days to get to New York. Whereas the common is round 40 days the variability makes planning unsure and it’s guess work at finest. The identical goes from China to the US west coast, which, regardless that it’s a shorter distance, will be anyplace between 17 days to a a most of between 50-60 days.
“In case you are a provide chain planner what do you place in your lead time and security inventory planning – minimal or most, or the common? When you put the common you must anticipate enormous variation and construct for uncertainty. It makes the planning extraordinarily troublesome,” stated Damas.
Damas stated the most secure method to take a look at the issue is thru the extent of the delays on the port of arrival. Drewry compares the ETA on the port of vacation spot with precise time of arrival and, in response to the most recent figures, the commonest delay is between two and 7 days however there’s additionally a excessive proportion of delays past per week (30%). That comes on high of the potential most delay in transit of fifty days.
Damas additionally pointed to knowledge from E2Open, the B2B provide chain software program firm, which signifies that lead instances for maritime transport have constructed up from already excessive averages during the last 12 months from 64 days to 73 days. Damas stated the query of longer lead instances mixed with much less predictable transit instances meant OEMs needed to preserve quite a lot of stock in transit and quite a lot of buffer inventory within the vacation spot market, each of which has related prices.
“It turns into a provide chain concern and a listing stock-out threat,” stated Damas, reiterating the purpose that if there was one message for the time being it was that the service degree in container transport was “completely dismal”.
The scenario has been exacerbated by the lockdown in Shanghai, which has hit each port and inland truck capability badly. The scarcity of truck drivers and the scarcity of container stacking areas within the ports mixed with decrease productiveness is having a really severe influence on the port of Shanghai to perform as a significant export gateway.
When it comes to full truckload (FTL) capability for inland logistics, Drewry’s knowledge reveals that volumes have dropped by 20% for China as an entire however by 80% in Shanghai, which by China’s quantity averages is a large quantity.
“In Shanghai, FTL trucking sector has collapsed for the reason that starting of April,” stated Damas. “The Shanghai lockdown is each a provide shock and a requirement shock.”
He defined that it’s a demand shock from a transport perspective as a result of transport infrastructure is just not coping in Shanghai: “The ports have fewer shifts and there’s not sufficient truck capability [so] the cargo will get clogged.”
It’s a demand shock as a result of the manufacturing services can’t preserve output due to labour or supplies shortages (as Tesla has discovered). Even when the lockdowns ended tomorrow it’s going to take a while to unblock the bottlenecks.
One other threat for OEMs and their transport suppliers is the backlash on the logistics infrastructure when Shanghai lastly ends all lockdown restrictions and manufacturing returns to regular. Recalling the primary Covid lockdown in 2020, Damas reminded delegates that Shanghai stopped for a couple of weeks after which surged with volumes on reopening. “At that time the transport system couldn’t cope,” he stated. “It’s both a requirement or provide shock. Be ready for a manufacturing catch up in Q3 and at that time there will likely be additional strain on out there transport capability.”
Providing recommendation on managing this strain and the present uncertainty available in the market, Damas suggested automotive OEMs to contemplate different distributors, ports and transport modes. He pointed to the rise in container site visitors being dealt with by ro-ro operators and delivered to port my Mafi vehicles as one different.
“Take into account rail, contemplate airfreight… additionally attempt to encourage new entrants,” stated Damas. “There [have been] six or seven new entrants prior to now two years within the container transport sector, [against] eight dominant megacarriers. Strategically why not encourage a few of the new entrants to make competitors work tougher.”
Damas additionally suggested the automotive sector to take a look at new routes and ports, noting that US west coast volumes may very well be rerouted to the east coast for intermodal cargo west or by means of Canada. This was of explicit curiosity on condition that there was a excessive chance of unionised port employee strike motion going down on the west coast ports in a few months’ time when the Worldwide Longshore and Warehouse Union (ILWU) and the Pacific Maritime Affiliation renegotiate their collective bargaining settlement.
The complete presentation and interview with Philip Damas from Drewry from Automotive Logistics and Provide Chain Europe is on the market to view on-demand.
Watch the complete session right here