Tag: Congestion

COVID Keeping Delays Consistent in China

The “COVID-zero” strategy throughout China and Hong Kong threatens to drive up logistics costs by 40% and drive down capacity to one-fifth of pre-pandemic levels as cities around Beijing restrict travel in response to new cases. Airports, highways, railways, ports, and other transportation sectors in Shenzhen, which shares a border with Hong Kong, are stepping up pandemic control measures as small outbreaks of the COVID-19 Omicron variant pop up in Tianjin, Xian, and Guangdong, China. 

 

With Cathay Pacific canceling hundreds of flights and the Port of Tianjin and airport suspending all pickup operations, the situation is stretching the supply chain to the breaking point. The omicron variant ended a three-month streak without local transmissions in Hong Kong where a two-week ban on incoming flights from eight countries is in effect until at least January 20th. 

In Shenzhen (an area where previously the most recent case was in May of 2020), two confirmed cases of COVID-19 have a contract tracing footprint of 123 people, some of who are isolated on a cruise ship that is now quarantined in the harbor pending testing. The fear of silent transmission chains has seized the cities leading to travel restrictions pending a negative test within 48 hours and requiring commuters to work from home rather than move between cities.

 

Because authorities in Shenzhen determined that it was highly likely that exposure came from a contaminated cargo shipment extra precautions are being taken at ports and airports to protect handlers from coming into contact with COVID-19. The added security measures will further delay cargo processing in addition to the reduction in workers as companies test and adopt enhanced screening procedures. 

Apart from ports and airports, highways and railways are experiencing delays, especially in the trucking sector as many warehouses turn away drivers from outbreak impacted areas. Last week, trucking operations at the Port of Ningbo were delayed by testing and this week trucking around Jinhua Yongkang is suspended pending testing results. 

 

Because Future Forwarding is dedicated to providing individualized supply-chain solutions to a range of businesses we encourage our clients to reach out for more information and ideas on how we can mitigate the delays we are facing. We know this could mean last-minute changes to carriers or modes of transport which could come with additional costs, but will do our best to mitigate or prevent them wherever possible.

More Stick than Carrot: the latest plan to clear the Southern California backlog

It’s only 60,000 containers by November 1st that have to get moved, right? Totally doable. 

 

Or not.

 

This week, the ports of Los Angeles and Long Beach decided the best way to get the 33,000 and 27,000 containers that have overstayed their welcome at their respective properties moving was to start charging the squatters penalties in hundred dollar increments.

The fee is to be assessed on local delivering cargo only and is designed to force importers and warehouses to take possession of containers rather than utilizing the ports as a cheaper storage location for warehouses that may already be overflowing and unable to receive more cargo.

 

Local delivering cargo will be assessed the fee after 9 days and rail delivery cargo after 3 days. The fee is $100 per day – but the problem is that it compounds to $200 on the second day, $300 on the third day, etc., etc.

The idea was hatched from a regularly scheduled meeting between the ports and White House Port Envoy John Pocari. With the daily average of container ships at anchor over seventy vessels and 24-hour operations not seeing the widespread adoption, they thought it would, ports have turned to the stick-in “carrot and stick” approach to incentivize the cargo to move through the backlog.

 

When the surcharges begin on November 1st, an estimated 60,000 containers on the terminals would be subject to the fee. The problem is it isn’t as simple as removing the container from the terminal. Critical chassis shortages and increased turn times have led to an inability of truckers to utilize all the appointments that are available because there are simply too many containers and not enough wheels.

The ports will pass this along to the carriers. Carriers, particularly those doing store door deliveries, will inevitably pass the charge along to their clients. Shippers forced to wait for a carrier’s equipment availability days after they are capable of receiving the container will undoubtedly be saddled with this fee, along with the demurrage and detention fees already applied.

 

We continue to work diligently to deliver containers to our clients as quickly as possible through the backlog, encouraging them to prioritize containers coming available to stop these penalty provisions that are adding hundreds and thousands of dollars to already record-high freight rates. For more information on this new challenge in Southern California, contact your Future Forwarding representative today.

Textile Troubles: Why southeast Asian supply chains are slowing

Companies seeking relief from China Section 301 tariffs, as well as seeking to take advantage of lower-cost labor, made the move to more developing nations in hopes of diversifying their supply chains pre-pandemic. While an idea with merit, the relocation of factories or component manufacturers requires a trained workforce, factories and more importantly, the means to get goods to buyers. 

 

For textile and apparel manufacturers, countries like Vietnam and Bangladesh held – and still do hold – great promise. However, with decreased passenger travel and another wave of Delta racing around the globe, these countries are also over-exposed to risk while their populations are woefully under-vaccinated.

 

According to data from the World Health Organization, as of September 27th a little over 26% of Vietnam’s population had received at least one vaccination dose and only 22% of the country is fully vaccinated. Bangladesh is even lower, with 14% having received one dose and 9% being fully vaccinated. Companies seeking relief from China Section 301 tariffs, as well as seeking to take advantage of lower-cost labor, made the move to these developing nations in hopes of diversifying their supply chains.

The low vaccination percentages mean that governments have only one recourse to restrict the spread of the virus – extreme lockdowns similar to what western countries imposed in early 2020 when there was little knowledge about how the virus was spread. 

 

That knowledge is today informing how countries, cities or states take action to protect their populations from further exposure and from overrunning their health care capacity. For Vietnam’s textile manufacturing sector, measures taken in and around Ho Chi Minh meant a third of the factories were unable to operate.

The lockdowns, slated to end mid-September, now run through the end of the month. This shutdown came at a time when Vietnam passed Bangladesh for the second spot on the WTO’s list of largest textile exporters. Small to medium-sized brands aren’t the only ones feeling the pressure. Global companies such as Nike have disclosed that they lost ten weeks of apparel and footwear production in Vietnam and it will take several months to return to full output.

 

Of course, these countries do not possess the huge network of containers, infrastructure and deep-water ports to command direct calls from vessels that are being held up in San Pedro here in the United States and increasingly at Chinese ports as well. So for the factories which are operating, securing equipment and space is even more difficult than in other, more developed parts of the Asian supply chain.

For exporters from countries like Vietnam, Cambodia and Bangladesh, this means adapting supply chains to prioritize high-value, most in-demand products and utilizing air freight when and where possible. Future Forwarding is focused on continuing to monitor the situation in these countries which are important to the textile and apparel sector and delivering important updates on rates, capacity and options for our customers’ supply chains.

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