Another wave of shipping and supply chain challenges is on the way
After a period of relative sanity, another wave of maritime congestion is expected soon. Now, weary retailers know the drill and are recalibrating supply chains and warehousing and manufacturing strategies.
At present, congestion has improved, according to a report by Avison Young, with only around 30 vessels waiting offshore compared to the 100 queuing at the height of the pandemic.
But the delays are expected to continue at least until early next year, according to its Sightlines report. Rising shipping costs, longer transit times and continued uncertainty have become the “new normal” for the shipping industry.
“That’s enough for businesses to consider their freight options and what combination of delivery options works best,” according to Sightlines.
Meanwhile, the peak shipping season for ocean liners resumes in August for the back-to-school and holiday shopping seasons, which could lead to more congestion.
Another problem is that ongoing negotiations between the union representing 15,000 west coast dockworkers and the shipping companies that own 29 west coast ports are disrupting work.
An overheated market is also impacting shipping contracts, with longer lead times and a need for advanced planning and sourcing driving many decisions. As in much of the freight industry, shippers and logistics providers must work outside the typical box to find new contracting methods and tendering processes to minimize risk. . Some send bid proposals for specific segments of a project, rather than the entire project, with the goal of working in time segments to control costs.
Shift spending from goods to services
Mike Sladich, regional manager and partner at Stan Johnson Company, told GlobeSt.com: “Freight rates fell in the first quarter of 2022, and we saw consumers shift their spending from goods to services. This drop in consumer demand has recently been flagged by retail giants, including Walmart and Target, in the form of oversupply issues as they try to deal with pandemic surges.
“Retailers will need to find space to store this excess merchandise, as most have to order products seasonally in advance and have not been able to adapt to a rapidly changing economic environment.
“The need for industrial inventory space will continue to be paramount in the near term, and retailers will be more demanding with their future inventory orders as the Fed takes extreme measures to reduce consumer demand.
“If the Fed continues to raise interest rates at a historic rate, it could lead to a deflationary period as a mass of seasonal goods hit shelves in the second half of the year and consumer demand wanes further. “
Reduced distance with consumers and suppliers
Adam Roth, executive vice president, industrial services, NAI Hiffman, tells GlobeSt.com that dDue to rising transport costs, companies will be forced to combat their journey length by reducing their distance to consumers and suppliers.
“This translates into more locations closer to people, ideally with a production component that allows for rapid response to consumer demand,” Roth said.
“What was once an anecdotal conversation about North American manufacturing is now a regular topic in the boardroom. As international transportation becomes more expensive and unreliable, domestic or North American production becomes more competitive. This will not cover all aspects, but some components can be completed at the regional level.
“The supply chain is being replaced by the supply network. We are entering the era of international regionalization and the first stages of de-globalization.
Colin Scott, vice president of global project and cost management consultancy Cumming Group, told GlobeSt.com: “We recently saw a 5% surcharge from suppliers to cover the increase in oil and petroleum costs. This surcharge is also related to material costs when petroleum is part of the material or requirement, such as when it comes to roofing membranes or freight.
“In addition, we are experiencing delays in the delivery of major equipment, which is impacting completion dates and increasing costs for owners of these construction projects.”
Ensure items are not sold twice
Chris Gorney, director of creative sourcing and procurement at architectural firm RDC, told GlobeSt.com: “Port access, slowdowns and widespread price increases continue to affect all aspects of our profession, although things have started to improve.
“The impact of the supply chain crisis on our customers depends entirely on the typology of the projects. For F&B retailers, we view kitchen equipment as a prohibitive time constraint. Our team now monitors individual equipment serial numbers to ensure that our equipment is not sold twice, only to be delivered to the location that was ready first.
In short, Gorney said his company is now considerably more conservative in setting expectations with customers. “To combat this, we now recommend exclusively sourcing domestically for all projects less than 24 months old,” he said. “The advantage of outsourcing the production and purchase of equipment overseas is simply not producing the advantage that it did three years ago.”
Demand will continue for IOS sites
Will Nelson, Director of Home Lending, Columbia Pacific Advisors, told GlobeSt.com that since the start of the pandemic, the global supply chain has suffered as a direct result of labor issues, increased the cost of fuel and the uncertainty in the world. markets.
“The limited supply of new and properly equipped warehouses and permitted outdoor storage space has only contributed further to the pressures on business operations,” Nelson said.
“We pride ourselves on being a forward-thinking company and exposure to the domestic market provides the opportunity to capitalize on emerging market trends. We believe the demand for strategically located IOS sites will continue to grow as the supply chain continues to stabilize and business continues to recover from the impacts of COVID and inflationary markets.