In the July episode of Supply Chain LIVE, project44 team members and industry experts discussed ocean trends and how carriers, shippers, and ports are all preparing for peak season. Watch the webinar on demand for more details and insights on sailing schedule reliability, dealing with port congestion, peak season predictions, and more.
Supply Chain Insights
Supply Chain LIVE host and Chief Industry Officer at project44, Bart De Muynck, first spoke with Josh Brazil, project44’s VP of Supply Chain Insights, on what some are calling the “supply chain crisis post-pandemic recovery period.” The first half of 2022 was heavily impacted by events including Covid-19 lockdowns in China, the Russia/Ukraine conflict, and strikes in Europe and Korea. An ongoing lack of intermodal capacity in the United States and Europe further complicated supply chains. Going into the second half of the year, inflation has been the driving force for disruptions as consumers shift their spending to services as the price of goods and fuel continue to rise.
Currently, on-time performance hovers around 10% – a far cry from 70-80% seen pre-pandemic. As every supply chain planner knows, these delays are a primary reason for current supply chain disruptions. However, looking at ocean data for June compared to January numbers show vast improvement in shipment delays. For example, delays on the China to West Coast route averaged 12 days in January. Five months later, June delays averaged 2 days.
While schedules have still not recovered, the gap is closing, and pre-pandemic reliability is moving closer to reality. Heading into peak season, on-time performance should continue to improve, barring unforeseen circumstances. Consumers moving spending away from goods due to inflation, spot rates coming down as demand subsides, and increased warehouse capacity as retailers work to clear out excess inventory will contribute to greater supply chain stability moving forward.
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Challenges at the Ports
To discuss ongoing challenges and peel back the curtain on port operations, Bart was joined by Ghim Siew, Head Group Strategy and Cargo Solutions at PSA International, and John Moseley, CCO at Port of Houston. One of the main topics that emerged was, unsurprisingly, congestion at the ports. In addition to investing in and accelerating infrastructure plans mentioned by John, both highlighted the importance of leveraging data and digital solutions. PSA International relies on APIs and clean data to better collaborate with supply chain decision makers while the Port of Houston has prioritized giving shippers and truck drivers access to their online platform to increase efficiency and move containers in a timelier manner.
Looking forward to summer and peak, erratic sailing schedules and high dwell times were noted as the main challenges. To mitigate these roadblocks, more collaboration is necessary to communicate needs and shortages especially when it comes to drivers and warehouse space. Containers sitting idle on chassis bring supply chains to a halt so increasing communication about when a container will arrive, where it is, and who is picking it up can go a long way in improving efficiency.
Because of Covid-19 disruptions, ports have grown in their ability to respond to exceptions and pivot as necessary making the upcoming peak season possibly just business as usual for those who have weathered the supply chain storms of the last few years.
Weathering the Ocean Carrier Storm
Bart was then joined by Roman Vigneaux, Managing Director of CMA-CGM, Middle East, to get the perspective of an ocean carrier. Over the last two years, CMA-CGM grew their fleet by 25%, allowing them to be more agile when it comes to factors like congestion and increased dwell times.
But when it comes to peak season, Romain doesn’t expect much change when it comes to ocean carriers’ day-to-day.
“Talking about the peak season coming on is a little bit complicated because we’ve been in a peak season for almost a year right now,” he said. “We had to manage and to deal with it. I’m not sure that the peak season of the Christmas period will be higher than what we already saw during the last eight or nine months.”
However, beginning January 2023, IMO 23 regulations will start to take effect, putting pressure on ocean capacity even more by 2024. Part of the initial International Maritime Organization Greenhouse Gas Strategy, this new regulation aims to reduce the carbon intensity of international shipping by 40% by 2030, and by 70% by 2050 (compared with a 2008 baseline level).
While this is a significant step forward for supply chain sustainability efforts, these regulations will strain ocean carriers in a new way as out of compliance vessels are removed. Romain estimates that even with adding a new vessel to their fleet, 10-20% of CMA-CGM’s capacity will be removed from reducing speeds to comply with mandatory low steaming.
Disruption-Proofing Retail
Like ports and ocean carriers, shippers have learned to better navigate the challenges associated with ocean freight since 2020. Rob Holland, VP Procurement & Transportation for Tailored Brands, is one of many retailers learning how to get ahead of disruptions and delays.
For Tailored Brands, several changes were made to stay on top of supply chain challenges, including placing orders much earlier; adopting a more fragmented approach to carriers and freight forwarders; updating lead times monthly instead of annually; switching ports from LA to Houston; and partnering with technology providers like project44 to not only improve visibility but also increase overall market insight. A dedicated data analytics team works in the project44 platform to understand transit data and identify trends, helping to provide more accurate forecasts.
Throughout most of 2021, their stores didn’t have merchandise when and where it was needed. But with the implementation of new processes and technologies, that turned around at the end of 2021 and stores are currently full of the right products, arriving at the correct times.
Communication, Communication, Communication
Communication is vital to strong supply chains. The guests representing ports, carriers, and shippers all agreed that the key to smoother shipping processes is understanding the needs of each party and working together. Those that thrive in the future of supply chain will be the ones that find ways to integrate systems and share key information. Recognizing the importance of each link in the supply chain is the first step in moving from working independently as competitors to working interdependently as a global team.
Join us next time for episode 4, “How Data Quality Impacts Supply Chains –the Good, Bad and the Ugly” on August 10 at 10 a.m. CDT. Find replays and register for upcoming episodes at supplychain.live.