Life in the world of supply chain can feel like a game of Whac-A-Mole — just when one issue is knocked down, another two spring up. This experience has been especially true the past few years. As shocks from the pandemic have started to fade, labor issues are causing concern at some of the world’s busiest ports.
As we’ve previously written, strikes can cause the average total duration of ocean shipments to increase anywhere from 15% to 50% due to containers getting stuck at the port. Case in point: the recent strike at the Port of Felixstowe caused a significant increase in the number of days containers spent at the terminal.
When the strike began on August 21, all ocean shipments at Felixstowe had been at the terminal for 5.3 days, on average, according to FourKites data. By August 30, delays peaked with containers spending an average of 9.9 days at the terminal, an 87% increase. With most transshipments spending anywhere from 12 to 45 days at sea, a delay of 4 or more days is significant.
Fortunately, delays at Felixstowe cleared up by September 10. During that time, however, a few major European ports – Rotterdam, Bremerhaven, Hamburg, and Antwerpen – saw port congestion tick up slightly. And, now, the threat of a strike at Liverpool looms.
A strike at Liverpool will cause an increase in delays as well as container volume shift, though it won’t have as significant an impact as what we saw at Felixstowe. Dwell times across Europe are still at a tolerable level and shouldn’t shut down production facilities or customer orders.
However, these delays compound with other upstream and downstream noise in the system, creating an extremely unpredictable scenario of what your end-to-end lifecycle will look like. One example is order lead time to customers. If there are production part availability issues, staffing issues, truck delays, and now port delays, we will see cases where an end-to-end transit time may go from 15 or 30 days to 20 or 45. This makes planning and forecasting extremely difficult for all parties.
While it’s always best practice, it’s more important than ever for everyone across a supply chain to be in constant communication with each other – especially as shippers and beneficial cargo owners (BCOs) leverage other ports and build a buffer into their demand plans to offset continual disruptions for freight coming through the UK ports.
While ocean freight rates are likely to remain high relative to pre-COVID levels, they have been slashed in half from one year ago on the spot container market. And though freight rate volatility will remain in the spot market, the contracted rate market will see significantly reduced pricing while steamship line operators look to secure consistent freight volume from shippers and BCOs.
Longer term, expect to see ocean shipping trend toward stabilization by early 2024 — carriers have added capacity, the lack of equipment should resolve and there will be, theoretically, more boxes than needed. And with the softening global economy, keep an eye out for carriers deciding to downsize their fleets, delay capital investments, and re-focus around new strategic areas, both in the road freight markets in EMEA and U.S. as well as the global ocean market.