We are squarely in the midst of extreme weather season. With Hurricane Ida still wreaking havoc in the US and typhoons and tropical storms in Asia, it’s critical to take stock of your supply chain operations and ensure that goods continue to stay in motion. While the damage from Hurricane Ida is still being assessed, we focus here on Typhoon In-Fa, a large tropical storm that drove record rains and damage to multiple countries including Japan, Taiwan and Philippines in July. In response to the storm, the Zhejiang emergency management department upgraded its typhoon response to the highest level, closing schools, canceling flights and suspending road traffic.
The initial disruption caused by In-Fa was violent, but temporary. In Shanghai, two of the busiest ports in the world were forced to close. At the Port of Yantian, meanwhile, officials were forced to evacuate hundreds of vessels, as 85 mph winds toppled containers and drove flooding further inland. While these initial disruptions were no doubt severe, the lasting impacts of In-Fa will likely continue to be felt for weeks to come.
FourKites’ data comes directly from monitoring the carrier ETA updates of downstream port arrivals of Chinese exports from 34 major ports across China. Here are some of the insights we’ve gathered from monitoring the regions impacted by In-Fa over the past several weeks.
The ports of Shanghai and Ningbo, located on the edge of the Pearl River Delta, are the largest and third-largest container ports in the world, respectively. As such they are responsible for moving huge amounts of Chinese exports that help sustain the global economy. Throughout the week of July 19, these ports saw decreased load volume and increased container dwell time at the port, across both import and export operations. The strain on the two facilities grew most pronounced between July 23-July 26, when port operations slowed or ceased entirely as a result of storm activity.
Even after reopening, volumes were heavily constricted. The Port of Shanghai dropped to roughly 52% of its typical intake of containers, and containers that were unloaded after In-Fa’s departure on July 26 took over 5 days on average — double the typical time — to reach unloading. The Port of Ningbo saw an even more dramatic drop in weekly export containers, completing less than 25% of its typical export capacity. As a result, containers loaded at Ningbo after July 30 had spent an average of 2 ½ days longer at port than containers over the previous month.
The good news is that these bottlenecks were only temporary, as the ports resumed normal operations and assessed damage. Still, the impact of tropical storm In-Fa is far from over. As we’ve seen in the past, even small disruptions at early stages of the supply chain can compound over time to cause extreme delays further down the chain, in a phenomenon known as the Bullwhip Effect.
Supply chains are resilient, but there’s only so much that can be done when disruption strikes an already-struggling facility. Since July 1, the number of delays on Chinese exports have increased an average of 25% each week, due to COVID-related restrictions and new cases of the Delta variant.
Then, as In-Fa’s landfall caused multiple ports to close, delays continued to rise and we saw a bullwhip start to take effect. In the first two weeks of August, average delays on Chinese ocean exports reached their highest point this year, up 71% from the last four months’ average. This was likely the result of the double whammy of the tropical storm, combined with COVID-19 delays still occurring at Chinese ports.
As ports recover, China is now facing lockdowns to a much larger extent than a 2-day tropical storm. Due to the massive volume of shipments processed by these ports each week, ports of destination for impacted shipments will see delayed arrival times, potentially driving conflicts in vessel scheduling and widespread supply chain bottlenecks, as delayed containers arrive at their ports of destination at the same time as shipments that were not impacted by the storm.
Following May’s COVID interruption at the ports and the resulting congestion, Chinese exports faced 3 weeks of growing delays as the bullwhip built up. If that pattern follows here, we should see carriers of Chinese exports sending an all-time high of delay notifications roughly 1-3 weeks from now.
Demand planning is centered around predicting consumer behavior, which has been something of a shell game for the last year and a half. In the US, goods manufacturers are ramping up for back to school season, the Labor Day holiday and a larger increase in individuals returning to an office setting. Demand has remained high through the summer months, while production and logistics capacity remain stretched thin. Shippers have worked to compensate, sourcing alternative capacity and securing capacity at rates that are impacting margins, all in the interest of continuing to retain customers’ buying confidence.
The impending bullwhip rippling through the global supply chain threatens to throw yet another wrench into this delicately balanced equation. With impacts from In-Fa being felt weeks after landfall, FourKites data shows that 15% of loads at the Port of Shanghai are still facing reschedules, compared to the average 5%. This 3x increase illustrates the backups still occurring at the port — a reality that will eventually make its way to the rest of the global supply chain.
Expect these 3 things as a buyer this holiday season:
What does all this mean for holiday shipping? It’s hard to believe that Black Friday, Cyber Monday and the holiday season are already upon us, but they are. In the supply chain world, right now is when companies begin to ramp up to meet holiday demand. In normal times, production lead times can vary from 2 days to 30+ days, plus the time to import a container from Asia can take 30+ days. That puts us at the end of October if we just placed our order today as a buyer! Throw in major capacity shortages and delays in the ocean shipping world, unheard-of air freight rates, and tumultuous truckload pricing and capacity, and it’s clear that we’re squarely in the midst of some unprecedented times.