Some companies use their supply chains as a competitive weapon because they believe good logistics translate into operational performance, margin increase, and a chance to adapt to markets and to the demands of clients.
Since some years ago, the competitiveness of supply chains has been increasingly important due to the challenges faced by companies amidst the world’s social and financial landscape. Likewise, the boom of information systems and the arrival of artificial intelligence, machine learning, and the Internet of Things has enabled an almost complete connectivity between suppliers and clients, which has made logistics become an essential factor for decision making.
It would be an understatement to say that the logistics industry has seen better days. The phrase “supply chain crisis” has been thrown around so much that it became a buzzword in 2021. Unfortunately, delays and shortages have defined the state of global logistics.
In 2020, COVID-19 shut down manufacturers and factories worldwide, with governments instituting lockdowns causing personnel shortages. 2021 would bring different challenges as economies began to open up due to the vaccines. Companies struggled with the booming demand for products as online shopping popularity rose.
Major trading hubs became congested with many freights getting stuck out in open waters and not enough longs horsemen unloading shipping containers.
Here are four major logistics challenges that modern businesses are facing
1. Labor and Shipping Shortages
The COVID-19 pandemic has put health and safety at the forefront of worker concerns. Surges in late 2021 and early 2022 have placed much of the personnel in quarantine. This problem has left their other coworkers overworked and severely understaffed to handle the massive influx of shipments.
Local government health guidelines also play a part in restricting workforce numbers. For example, China has instituted a mandatory seven-week quarantine for returning cargo crews. This policy further aggravated an already growing backlog in cargo that needs to be processed.
This issue exacerbated the already shrinking pool of qualified drivers and dockers, with a sizable number choosing to retire early.
Larry Davidson, CEO of North American Produce Buyers Ltd., Toronto, Ontario, explains, “Every input along the assembly line is challenged. You’ve got a situation where there weren’t enough drivers, to begin with, and now we’re taking out another chunk of them from the pipeline and just making a difficult situation even worse. There are no trucks to get them (shipping containers) and they’re sitting, and when the next round comes in behind them, they’re going to be sitting, because they’re not going anywhere on the ones in front of them.”
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Due to the lack of skilled workers, it now takes longer for shipping containers to be unloaded and shipped back out for reuse. Many storage boxes are simply waiting to get unloaded. And this takes up space and generates no income but incurs extra costs. The lack of ships available also means these containers take much longer to get to their end destination. There simply isn’t enough storage space for items anymore. Warehouses are filled to the brim with inventory, and demand for industrial real estate outpaces available supply.
2. Rising Freight Costs
2021 was highly profitable for container carrier companies. Shipping intelligence provider Alphaliner reported that the ten (10) leading publicly listed container shipping lines earned a record $115 billion to $120 billion profit.
But behind that growth record, high freighting rates were caused by a spike in fuel prices and the ongoing shipping container shortage.
TIME reports, “Transporting a 40-foot steel container of cargo by sea from Shanghai to Rotterdam now costs a record $10,522, a whopping 547% higher than the seasonal average over the last five years.”
The cost of transporting goods from China to the UK has skyrocketed by 350%.
Global events such as the Ukraine-Russian War and the Suez Canal blockage by the Ever Given have disrupted shipping lanes, causing freights to take much longer routes.
Transportation costs continue to rise, and experts predict that they will continue to do so in the foreseeable future.
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3. Managing Complex Systems
The logistics sector is highly fragmented, requiring expert management of multiple teams, services, and networks.
As businesses begin to expand their operations and markets, naturally, this will involve more processes and dealing with other people across time zones. Transparency is vital, and the supply chain crisis has exposed just how fragile some of these processes can be. Only 22% of companies have a proactive supply chain network. It means that they can easily adjust to sudden changes in supply or demand before they become critical.
Unfortunately, many entrepreneurs have found it difficult to restore and restructure their logistics networks due to the pandemic. Growing costs and slow growth make it hard to identify key points for improvement on top of reducing losses.
4. Handling Customer Expectations
The buying habits of consumers have shifted to online shopping over the pandemic. As more people spent more time indoors for their safety, online marketplaces were the only way to buy groceries and necessities reliably. Offices transitioned to work-from-home schemes necessitating more devices to be more productive at home. The bigger the problems in the supply chain, the greater the need for containers, but when the problems are reduced, the need will be reduced too, reports Container News.
To quantify the above, the Danish maritime data analysis company Sea-Intelligence, in issue 564 of Sunday Spotlight, examined the data provided by Hapag-Lloyd and matched the volume of cargo transported and the equipment fleet over a longer period. All of this is accompanied by the caveat that Hapag-Lloyd’s operational performance in relation to their equipment is taken as a proxy for the entire market.
Sea-Intelligence started the analysis by looking at the development of both the size of the equipment fleet and the number of containers transported over the last 12 years. The efficiency of the equipment was then calculated by looking how many full loads of cargo were transported per container in the equipment fleet.
In 2010-2014, the effectiveness of the equipment fleet was relatively stable at 1.3 loads per container per quarter, followed by high volatility in 2014-2017 and stabilizing again at an average of 1.18 full loads per container in 2018-2019.
In 2020-2022 the effectiveness decreases significantly to 0.95 loads per container in the 4th quarter of 2021 and seems to improve slightly to 0.98 in the first quarter of 2022.
Contemplating the normalization of the supply chain in the first quarter of 2022, Hapag-Lloyd needed an equipment fleet of just over 3 million TEU to move their cargo. If the supply chain bottlenecks were removed now, Hapag-Lloyd would need 17 per cent fewer containers in their equipment fleet, compared to what they have presently. If this is representative of the global market, there would be a need for 17 per cent fewer containers than what we currently have.
The global container fleet reached 50 million TEU in 2021. If 17 per cent of this becomes redundant, this equals 8.5 million TEU in excess equipment. Accommodating for the 4.5-4.8 million additional TEU to be delivered in 2022, and we end up with 13 million TEU of excess containers in 2023, Sea-Intelligence highlights. With these new preferences come high expectations. Customers will always want to know where their products are and when they will arrive. Speed and convenience are key performance indicators for successful container operations.
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Growing a loyal following has its benefits as well as risks. Increasing customer retention by just 5% boosts profits by 25% to 95%. However, 49% of consumers have left brands due to poor customer experience in the past year. These four logistics challenges put all the pressure on businesses to deliver satisfactory customer experiences. The good news is that industries are actively developing solutions to these problems through emergent technologies and reliable trading platform.
How a Trading Platform Can Help Overcome Logistics Challenges
Trading platform allow enterprises to buy, sell and lease container while managing container operations, such manual workload, insurance and payment instead of outsourcing to third-party service providers. 3PLs usually charge you for their offer end-to-end services that can fill in the gaps in your supply chain.
Many successful global trade industries have stopped using 3PLs to help reduce the supply chain crisis. Having more time to focus and simplify their end-to-end container operation with few clicks under one intuitive fast online platform.
Here are the ways working with a Trading platform can streamline your logistics:
1. Flexibility and Scalability
One of the main advantages is that it can quickly scale the size of your business operations, using only the ideal combination of space, staff, and transportation. There are no redundant costs or wasted opportunities.
Trading platform uses automated tools and technologies to help your business grow fast. For example, forecasting, accurate inventory tracking, automation, and buying, selling and leasing container provide essential insights to guide you in making the right decisions and adjustments.
2. Cost Efficiency
A platform greatly reduce the need to invest in warehouse space, transportation, and hiring staff to manage your logistics. You can also enjoy reduced carrier rates as these logistics partners can negotiate preferred shipping fees on your behalf. What’s more, since they handle all of the logistics processes for you, you can spend more time on other essential business operations.
3. Access to Expertise and Experience
Managing an entire business is tough work, and it could be counter-productive to do much all by yourself. Working with a a platform expands your horizons regarding the complex world of logistics management. These service providers understand all the nuances of shipping and are well-equipped to adapt to major logistics challenges.
You don’t need a technical know-how and industry connections to give you important insight on how to improve your processes better. They could also help you be more confident in making crucial business decisions.
4. Improved Customer Satisfaction
Faster delivery times, and reliability in multiple reliable markets help deliver a superior shopping experience for your customers. We can make this possible with just a few click on our platform to your supply chain. They can inform customers of every step that their purchases go through. Expectations also get better managed with transparent item availability.
Some platform also offer customer service support, making direct communication with customers much easier. Though running an online business has its fair share of logistics challenges, modern technology, and an expanded network give you an edge in weathering sudden shifts in the supply chain industry.
Neu-Marke offers reliable trade logistics solutions for your container operation growth. We strategically advice and plan with you on how to use an all-in-one digital platform to handle trading and leasing of containers, real-time container price insights, workload inventory management, and more, global scaling is easier. Contact us and learn more about how we can make logistics easier for you.