Global supply chains are under pressure as we enter the busy Christmas season. There have been ongoing issues for some time, with the COVID-19 pandemic drastically changing both customer demand and available cargo space. Other issues are now making this worse, putting a huge strain on cargo and supply chains as we approach the end of the year.
GUIDES FOR AVIATION AND FLIGHT PLANNING
Christmas rush
The festive season is always a busy time for cargo and logistics. This year is set to be more challenging than normal, though, with the industry already in a difficult position. Ultimately, problems in supply will affect end consumers and shoppers. At best, prices will be higher. At worst, companies also won’t be able to get items shipped and delivered in time.
This was seen as early as October, with Bloomberg writing at the time:“Early in the year, the hope was that the bottlenecks that gummed up the global supply chain in 2020 would be mostly cleared by now. They’ve actually only gotten worse — much worse — and evidence is mounting that the holiday season is at risk.”
Disrupted supply chains linger through the pandemic
The main cause for disruption, and drastically increased cargo prices, lies with COVID-19. The global cargo capacity was significantly reduced during the pandemic and is struggling to keep up as demand now returns. Cargo space on commercial flights, in particular, was hugely reduced, and especially on long-haul routes, this remains a problem.
Many other factors have piled up during the pandemic too. Container shortages remain, COVID-related closures continue, and there are labor shortages in many areas.
Getting worse in late 2021
You would hope that so far into the pandemic the situation was improving. In fact, it continues to get worse.
In August, China closed its container terminal at Ningbo-Zhoushan, south of Shanghai, after a dock worker tested positive for COVID. The port is the third busiest in the world (according to reporting from CNN). As such, this had a major effect on shipping and supply routes. It increased demand at other ports, themselves also suffers from ongoing delays and problems.
With China remaining focused on a total zero-COVID policy, such action could easily be repeated. Supply logistics have also been affected throughout the year by fall out from the blockage of the Suez canal in March. These things don’t resolve themselves quickly.
COVID also continues to cause problems in local markets and with devasting uncertainty. The second half of 2021 has already seen factories in Vietnam close for example, over COVID restrictions.
As we approach the end of the year with the spread and uncertainty of the new Omicron variant, this could easily get worse. Restrictions in European countries will once again cause supply china problems. In Asian countries, where the new variant has yet to take hold, fear will be running high.
Rising air freight prices and use of charters
All these issues have sent cargo prices surging. In August, the World Container Index showed rates on major routes up an average of 360% from the year before. On key routes from China to Europe, it is up over 650%.
WIth shipping, though, an equally big problem is the uncertainty and delays. Speaking to CNN, Bob Biesterfield, CEO of C.H. Robinson, estimates the chance of on-time arrival to be down to 40%, from 80% last year.
With these challenges with shipping, more and more companies are turning to air freight. There are still delays there, with congested terminals and customs facilities. But this is more predictable and less problematic. Air Charter Service reports UK-based cargo charter demand up 150% compared to pre-pandemic levels – and 70% up just in October 2021 with the worsening situation.
As demand has increased, air freight rates have risen. In Septermber, The Baltic Air Freight Index (BAI) reached its highest level ever, showing an average global increase in cargo rates of 166%. This continues to increase, with The Loadstar reporting rises ex-China of 19% just in November.
Congestion at airports
As if rising prices and issues with availability were not enough, there is another challenge with air freight taking hold as we approach the year-end. There is rising congestion at many airports worldwide, with freight build-up affecting onward transportation.
Many large airports are reporting freight backup. Volumes coming in have increased, and the resumption of passenger flights has quickly changed cargo delivery patterns. As more comes in, though, there are challenges with onward distribution. The industry is suffering from significant labor shortages, both at airports and in the forwarding and transportation of goods.
Consider partnering solutions
Flight-based cargo offers more security and guarantee of timely delivery currently. Chartering aircraft is one way to get around the availability issues and is something more companies are now looking at.
One way to help navigate the challenges is by partnering with a specialist company for management assistance. Flightworx offers a flexible option for cargo operations, able to handle full management of flight and ground services or just bespoke areas as needed.
Final Thoughts
The disruption to supply chains and cargo capacity has been going on for some time now. It is likely to worsen over Christmas, but even after it shows no signs of abating. Speaking to CNN, Hapag-Lloyd chief executive Rolf Habben Jansen said he didn’t expect the situation to ease before the first quarter of 2022. But it could take much longer. Air freight will have strong advantages as long as the situation remains challenging and changing.
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Sources:
Bloomberg quotes – https://www.bloomberg.com/news/features/2021-10-04/out-of-stock-shortages-for-christmas-shopping-put-retailers-at-risk
CNN news: https://edition.cnn.com/2021/08/23/business/global-supply-chains-christmas-shipping/index.html
Air Charter Service – UK increase statistics
BAI from The LoadStar: https://theloadstar.com/grim-picture-for-shippers-with-no-relief-from-elevated-air-freight-rates-in-sight/
