Logistics’ pre-pandemic days are over and what defines the new set of standard operating procedures for the supply chain remains to be seen.
Stakeholders from first mile to last mile tackled the topics of port congestion, container capacity and the warehousing and labor shortage among other subjects in a wide-ranging panel held during Sourcing Journal’s annual Hong Kong Summit.
At the heart of the supply chain’s greatest challenges today is the push and pull between congestion and capacity, whether that be on container ships, at the ports or warehouse availability.
“I think it’s cliché by now but also true that maybe we’re never going back to pre-pandemic, whether that be pricing, whether that be all the systemic issues,” pointed out Vincent Iacopella, executive vice president of growth and strategy at Alba Wheels Up International LLC. “I don’t think people want to go back to a lack of … data. I don’t think people want to go back to ocean carrier policy that is not sensitive to demurrage and detention [fees], but they do want to go back to the pre-pandemic [container] pricing, right?”
However, as long as consumers are going to continue to buy goods, pressure will remain on capacity and pricing, particularly in the transpacific trade route connecting Asia and the U.S.
“As long as the consumer demand is there throughout ’22, most believe that the capacity and the pricing issue will continue,” Iacopella said.
The sharing of information, policies to make ocean carriers more accountable and transparent and greater awareness of how port congestion impacts the U.S. export community, have helped to address some of the congestion issues, pointed out American Association of Exporters and Importers president and CEO Eugene Laney Jr.
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Specific to the Port of Long Beach is the facility’s Pier B on-dock rail project, which is part of a broader focus on rail over over the next decade. The possibility of a container dwell fee—that has yet to be imposed—has led to a 60 percent reduction of long-dwelling containers, while the number of ships queued has dropped from 110 in January to 35 and increased hours of operation have also helped ease congestion, according to Port of Long Beach managing director of commercial operations Samantha Galltin.
It’s not just the transportation aspect of the supply chain that is strained.
The middle mile and the movement of goods into warehouses have become a headwind with an industrial real estate shortage leading to rising costs per square foot that some say might be creating a new set of market conditions.
“We think these prices are here to stay,” said DHL vice president of business development Scott Lyons, forecasting a continued upward trend. “The prices are a function of the land cost and the material cost and capital cost, and all three are going up.”
The Amazon model of delivery has yielded a new breed of consumer conditioned to expect two-day delivery or faster as the norm. A lack of warehouses and, now, a lack of labor in those boxes is a headwind.
“We just can’t find the workers. We don’t know where they went in the pandemic,” Lyons said. “And so we’re having to pay more to keep our operations running and we need to stay ahead of that. The last thing you want to do is with turnover find yourself short of labor. You just can’t keep up and it’s very difficult to recover.”
Other matters also hang over importers and exporters.
Domestically, there’s the West Coast dockworker contract that must be renewed in the summer with the current agreement set to expire July 1.
The implications of what happens if there’s a work stoppage or slowdown at the ports have long been a consideration each time the contract comes up for renewal, Iacopella pointed out.
“As we neared 2022 … there were reports that the talks would be more complicated than anticipated, which always happens and the latest report that we’re getting from stakeholders are that things are looking somewhat positive agains,” Iacopella said, before adding, “I would not be surprised if the July 1 deadline was extended mutually by both parties.”
There’s also geopolitical uncertainty, specifically with the war in Ukraine.
“There are a lot of unintended consequences, but for us importers and exporters they’re just trying to avoid some of the trade compliance issues that might come along with doing business with Russia,” Laney said. “And, I think that’s what’s really keeping up a lot of those companies at night.”