Apr 20, 2021 | Industry
The recent blockage of the Suez Canal has turned the eyes of the world towards the shipping industry.
While most people outside the supply chain industry were shocked to learn about the fragility of the global ocean freight network, it was not entirely surprising to those of us in the know.
After all, ports are under substantial strain as supply chains rebound after unprecedented global challenges. From the sheer volume of goods to the lack of skilled personnel to the expansion of regulatory requirements, port congestion is a growing problem worldwide.
But, what are the underlying causes of this congestion?
How does it impact freight forwarding and shipping companies?
Are there ways for organizations to sidestep port problems across their supply chain framework?
Here's what you need to know.
While the COVID-19 pandemic is the simplest answer to current severe port congestion conditions and overall supply chain disruption (perhaps mayhem is a better word for it), the underlying causes are far more complex.
First is the volume of goods and the size of the vessels at anchor in many ports. As noted by Freightwaves, not only is the total number of container ships at anchor in Los Angeles and Long Beach up substantially, even when compared to the totals driven by labor unrest in 2015, the ships of 2021 are both larger and carrying more freight. As a result, the verification and processing of ocean freight take significantly longer.
Staffing issues related to the current global crisis are also causing port delays. According to Sustainable World Reports, while conditions have improved in recent weeks, many ports continue to report terminal staffing shortages as they look to bring employees back but struggle to find experienced workers who are still available after being furloughed. The outcome is no surprise: More ships, higher container volume, and fewer staff lead to longer wait times and increased congestion.
Political pressures also contribute to port congestion. As reported by The Maritime Executive, ongoing challenges around post-Brexit trade have led to significant port slowdowns, especially as regulatory and compliance expectations continue to evolve.
These are only a few of the issues at hand causing strain on terminal congestion. Chassis shortages, severe weather events, and other local geo-political occurrences can have a major ripple effect on the global supply chain as well.
So what happens when ports can't perform as intended? When berths are full of massive ships, staff are lacking and regulatory requirements remain moving targets?
The first impact felt is throughput. Shipments that might have taken a day or two for processing and release under normal circumstances may require double or triple that time, making it difficult for freight forwarders and shippers to coordinate logistics hand-offs and effectively manage relationships with essential Importers of Record (IoR).
Next is complexity - as goods sit in dock for longer periods of time, additional paperwork or customs approvals may become necessary to ensure that shipments are processed as quickly as possible. This requires added time and resources from freight forwarders - many of which are already dealing with much higher order volumes than normal. If forms are forgotten or incomplete, the results could range from further delays to returned shipments.
Increased costs are also a potential consequence of port congestion, especially in the areas of demurrage and detention. In both cases, storage of goods is covered by a contractually defined free period which allows for storage inside (demurrage) or outside (detention) a port terminal. Once this free period expires, shippers and freight forwarders are charged for each additional day their goods remain. The problem? Increasing delays in processing mean substantially increased D&D costs - over time, these costs eat into shipper profit margins and reduce the ROI of transported goods.
While it's impossible to avoid port problems thanks to current supply chain and shipping conditions worldwide, it is possible to minimize the impact of these issues on transport and shipping operations.
The key to overcoming congestion concerns? Agility and insight driven by robust digital solutions. Here's why: While legacy processes may have been sufficient in a pre-COVID world to manage worldwide shipping frameworks, these "good enough" solutions lack the responsiveness and reliability required to handle the volume and variety of challenges in today's shipping climate.
In practice, cloud-based, data-driven freight and shipping software solutions provide critical benefits to help solve port congestion problems, including:
With D&D rates, charges, and processing timelines changing daily, companies need software capable of collecting and curating shipping data in real-time to provide complete transparency across potential port options. The result? Shippers and freight forwarders are able to select the best port for their shipment based on both current conditions and evolving trends.
Where are your containers? Which carrier are they with, and what's their current status in port? Effective container management requires real-time visibility into carriers worldwide. The Magaya container tracking solution combines support for more than 70 global carriers with worldwide tracking sources to ensure you always know exactly where your containers are - and what needs to happen next.
Internal shipping and freight teams aren't the only ones concerned about the status of your shipments - customers also have a vested interest in both current container conditions and any information about when their shipment will arrive. Historically, this kind of customer support contact was handled by in-house teams via phone calls or emails, but the sheer volume and variety of orders now in transit make this difficult at best and impossible at worst.
LiveTrack by Magaya offers an out-of-the-box solution that provides customers with on-demand, real-time tracking information via a web portal or mobile application, in turn providing increased visibility and improved customer experience while simultaneously reducing overall staff workloads.
Extreme congestion is a real - and growing - problem for shippers and freight forwarders worldwide. And while there's no way to completely avoid the impact of higher shipping volumes, fewer staff, and evolving port regulations, the right software can help solve the key challenges of shipping risk, streamlined operations, and total shipment ROI.
Schedule a free demo today!