Currently, there is a serious storm or even a hurricane ongoing in the ocean freight industry. Rates are at an all-time high (BCI’s monitor shows an average of factor 4, with outliers of factor 10!), capacity is limited which is strengthened by the false container positioning and port congestion due to Covid-measures and high demand is counted in weeks instead of days. The reliability of ocean freight is all time low which pushes the need for end to end visibility even further.
BCI’s Transportation Monitor reports that the current situation of capacity shortage and high rates will continue the remainder of 2021.
Source: BCI Global, 2021
The key drivers behind the capacity constraints and high rates (high demand, port congestion, false container position and shipping lines’ capacity management in an oligopolistic market), make the outlook for the longer term very uncertain.
Six key tactics to better manage ocean freight
BCI defines six key tactics to “weather the storm in ocean freight” mid- and long term:
- Improve the forecast; shippers have to get their forecast in order and live up to the promised forecast. Ocean freight should no longer be used to “cover-up” planning issues in the rest of your manufacturing & logistics network. Next to that, try to stabilize the volumes offered; the more stable the volumes the easier it is to get capacity against reasonable rates.
- Improve the visibility in the supply chain; the unreliable lead times caused by port congestions and blank sailings increase the need to improve your visibility to allow fast response in the supply chain parts impacted.
- Create optionality; have alternative transport solutions in place (ocean to rail or even air for emergency shipments) and prepare alternative routes and alternative shipping lines from different alliances for your key transport lanes.
- Create partnerships with shipping lines and freight forwarders; establish stronger partnerships with fewer partners at shipping lines and freight forwarders.
- Collaborative procurement; in case a shipper is not able to offer stable or large enough volumes, participating in ocean freight buying groups to smoothen and increase the demand is an option. Within these groups central communication, forecasting and levelling of volumes are considered as key advantages.
- Redesign the Supply Chain Footprint; evaluate your supply chain and check whether increased buffer stocks, de-risking of your supply chain or even local/near shoring are options to limit the exposure to the ocean freight challenges.
Read the monitor and/or view the webinar recording and use it to learn what you can do or ask for help to determine your specific strategies for managing Ocean freight. Download the Transportation Monitor below. You can request the webinar recording via one of our experts below.