Facing stormy seas, the shipping industry must shore up resilience

The ship­ping indus­try is worth tril­lions of dol­lars, car­ry­ing 90% of all glob­al­ly trad­ed goods, accord­ing to OECD data. But as it nears its busiest time of the year, the fore­cast doesn’t look good.

Hav­ing weath­ered the storms of Covid-19 and the Ever Giv­en block­age in the Suez Canal, ship­ping has now been impact­ed by an unprece­dent­ed heat­wave in Chi­na, which has caused dis­rup­tion to vital logis­ti­cal routes. At the UK port of Felixs­towe – which han­dles almost half of con­tain­er freight enter­ing the UK – ships have been unable to dock due to work­er strikes.

Sev­er­al ongo­ing prob­lems con­tin­ue to bite hard, such as the soar­ing costs of fuel, the rock­et­ing prices of con­tain­ers, and staff demands for wage increas­es. 

Enda Bres­lin is gen­er­al man­ag­er for EMEA at glob­al ful­fil­ment provider Ship­Bob. He expects UK retail­ers to brace for sup­ply chain chaos as man­u­fac­tur­ers and retail­ers await parts and prod­ucts ahead of Hal­loween, Bon­fire Night, Christ­mas and the Jan­u­ary sales.

“As we saw dur­ing the last sup­ply chain cri­sis, one stone drop­ping into the ocean can have huge rip­ple effects. The strikes will inevitably lead to car­go ships being unable to unload and this could have ram­i­fi­ca­tions as we rapid­ly approach peak sea­son,” he says.

Runaway costs 

Dani­lo Pro­mo­tions is already bad­ly impact­ed. It sup­plies Christ­mas cards, gift wrap, gift bags and cal­en­dars to the UK’s major high street stores and has seen some con­tain­er loads delayed by two to three months. 

Founder Lau­rence Prince believes this could cost the busi­ness hun­dreds of thou­sands of pounds. He sug­gests the gov­ern­ment has a role to play in boost­ing shipping’s resilience, includ­ing work­ing with the ports to find agree­ment with strik­ing work­ers.

The whole sys­tem is reliant on each of its con­stituent parts to keep an unin­ter­rupt­ed flow of goods mov­ing, par­tic­u­lar­ly dur­ing peak sea­sons

“It could get involved and lim­it the cost of con­tain­ers or put a cap on what we can be charged. It’s not only our Christ­mas prod­ucts; you have food and grain and every­thing else,” he says, acknowl­edg­ing the impact on “vital neces­si­ties com­ing into the coun­try”.

Like many oth­er man­u­fac­tur­ers, a switch to air freight for Dani­lo is impos­si­ble due to the expense and space need­ed for such a heavy weight of prod­ucts. That inabil­i­ty to find oth­er options is why many fear shipping’s cur­rent pres­sures will con­tin­ue for the long term. 

Heath Zarin is founder of EV Car­go, which car­ries for Sainsbury’s and Asda. He told Bloomberg ear­li­er in the year that the world “needs to be pre­pared for more volatile and expen­sive glob­al sup­ply chains”.

Boost­ing resilience with­in ship­ping is seen as tough due to the lack of alter­na­tives and because its oper­a­tions rely on many inde­pen­dent fac­tors going right. This has forced some glob­al man­u­fac­tur­ers to source parts and raw mate­ri­als from two coun­tries at the same time, just in case one deliv­ery is delayed at sea. 

How­ev­er, this is not afford­able for most. Ship­Bob research – con­duct­ed with Cen­suswide among 750 founders of UK brands that sell con­sumer goods online – found 45% said expen­sive ship­ping was their biggest chal­lenge to inter­na­tion­al expan­sion. 

The cost of ship­ping a shoe­box-sized par­cel from the UK to Amer­i­ca has risen by near­ly a third in just 12 months, the study found, from £15.73 to £20.56. This is due to a com­bi­na­tion of cur­ren­cy fluc­tu­a­tions, inter­na­tion­al fuel sur­charges and infla­tion.         

Oth­er man­u­fac­tur­ers are choos­ing to ‘reshore’ where they can. Ship­Bob found near­ly four in 10 (38%) of busi­ness­es it spoke to planned to man­u­fac­ture domes­ti­cal­ly in the next 12 months.

Turning to technology

Tech­nol­o­gy can have a pos­i­tive role to play in build­ing greater ship­ping resilience. Bart Cop­pel­mans, head of glob­al sup­ply chain & logis­tics indus­try solu­tions at HERE Tech­nolo­gies, points to sev­er­al options: for exam­ple, a mix of 5G net­works and sen­sors relay­ing infor­ma­tion faster and RFID tags pro­vid­ing loca­tion-based data for remote track­ing and mon­i­tor­ing. 

“With an indus­try process as com­plex and time-reliant as the sup­ply chain, it is impor­tant to have clar­i­ty on each com­po­nent to address poten­tial prob­lems as they come,” he says. “Real-time loca­tion data can improve the effi­cien­cy, aid­ing vis­i­bil­i­ty of arrival times and enabling them to recal­cu­late load­ing and unload­ing points on time.”

At Solent Gate­way port in Southamp­ton, head of busi­ness devel­op­ment Chris Ander­son says pres­sure has built as the vol­ume of goods increas­es in the run up to Christ­mas. Part of its resilience plans include an off-dock stor­age solu­tion to unlock addi­tion­al capac­i­ty.

As we saw dur­ing the last sup­ply chain cri­sis, one stone drop­ping into the ocean can have huge rip­ple effects

Some experts advo­cate greater use of robot­ics to offload and load goods into ware­hous­es, enabling the space to be used more effi­cient­ly with more packed in.

How­ev­er, for Ander­son, the HGV dri­ver short­age is still impact­ing ship­ping resilience. Ports are well equipped to han­dle con­tain­er vol­umes if the rest of the sup­ply chain works as it should, he explains. “The whole sys­tem is reliant on each of its con­stituent parts to keep an unin­ter­rupt­ed flow of goods mov­ing, par­tic­u­lar­ly dur­ing peak sea­sons,” Ander­son adds.

The biggest chal­lenge here is get­ting con­tain­ers to off-dock sites when there aren’t enough dri­vers. If a port is con­gest­ed with car­go, which can hap­pen “sur­pris­ing­ly quick­ly”, then the ship can­not wait. “It will have to sail for the next port with the car­go des­tined for the UK still on board – this is how short­ages on the shelves hap­pen,” Ander­son says.

Government support 

The gov­ern­ment could sup­port indus­try resilience by expe­dit­ing per­mit approvals for the stor­age of bond­ed goods, Ander­son believes, fast-track­ing plan­ning for new stor­age sites and pro­vid­ing tar­get­ed sup­port to encour­age more peo­ple to train as HGV dri­vers.

Larg­er retail­ers are expect­ed to feel the great­est impact. ShipBob’s Bres­lin sug­gests they will need to part­ner with mul­ti­ple car­ri­ers ahead of time to ensure con­tin­gency options that would let them switch deliv­er­ies in the case of strikes or extreme weath­er. Small­er ecom­merce brands, he explains, have built resilience in the past few years through direct-to-con­sumer chan­nels.

Indus­try-wide, there is a small piece of good news. The lat­est data from Sea-Intel­li­gence shows that sched­ule reli­a­bil­i­ty has increased to 40.5% in July 2022, up from 40% in June.

But in the mean­time, Dani­lo must play a wait­ing game. Some ship­ping timescales have moved from 10–12 weeks to 18–20 weeks. Prince accepts that Covid-19 and Brex­it have had an impact but says the com­pa­ny now faces con­tin­u­al changes and updates to its logis­ti­cal plan­ning and finan­cial fore­cast­ing.

“Every­body blames every­body else, but nobody actu­al­ly takes the blame.”

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