When Will The Effect Of The Pandemic On International Logistics End?
Undeniably, international logistics is one of the sectors that was directly affected by the Covid-19 pandemic. The pandemic caused massive supply chain disruption in international trade and logistics, resulting in global increase in demand with limited shipping capacity. This caused a rapid and non-stop rise in shipping costs. The spike in freight cost coupled with high demand has caused importers and exporters huge problems.
Also, Amazon sellers are not left out of the Covid-19 pandemic effect. At the pandemic's peak, Amazon sellers cannot transport their shipments from any part of the world due to the national lockdown and imposed travel restrictions. After the lockdown, Amazon sellers faced the issue of pandemic-induced supply chain delay while shipping to Amazon FBA, in spite of the high consumer demand for global goods. This contributed to the surge in freight costs keeping some products out of stock. The higher freight costs resulted in inflation in the prices of imported retail goods. Quoting Steve Yates, CEO of management consultancy Prime Guidance, a firm that advises Amazon sellers, "Freight costs have gone up, and our clients have had challenges getting inventory."
Though there is an improvement in manufacturing, it is almost back to normal, especially in China, but the issue of global freight demand outstripping shipping capacity and high freight rate continues. The shippers are at the receiving end of this while carriers continue to enjoy an increased operating profit.
Unfortunately, the logistics industry and global trade experts believe that there is no end in sight for the effect of the pandemic in the international logistics industry. They claim that the global demand-supply imbalance, port congestions, delayed delivery, blank sailing, and high freight rates may continue until 2023 or beyond.
Supply chain experts believe that the challenges at ports other supply line issues will persist into 2022 and possibly beyond.
Aaron Alpeter, founder of Izba Consulting, a supply chain consulting, outsourcing and technology firm, said, "There's a lot of fundamental restructuring going on as a result of the pandemic-induced demand shifts and geopolitics that we are probably 12 to 18 months away from being in a new steady-state,"
Another expert Drewry claims that Worldwide port congestion could last until well past February 2022 as retailers decide to use the traditionally slow period after Lunar New Year to refill inventories and avoid the stockouts during 2021.
Looking at container shortage, many experts opine that this issue is temporary but uncertain about the time it will finally end. Lars Mikael Jensen, an executive at the freight bigwig Maersk, said, "It is expected that the situation will improve, bottlenecks are expected to be relieved, buying patterns likely to normalize, as well as additional vessels and containers entering the market in 2021, means that the current vessel and container shortage is temporary in nature,"
Triton CEO Sondey predicted on the April earnings call that the shortage will drag into 2022. He said, "I haven't seen any of our customers express confidence that they can, within this current strong period, unbottleneck their operations…I think the betting is probably [that the shortage will be resolved] sometime at the end of this year or early next year when maybe the trading world starts to get back to normal."
In effect, the container rates and shipping rate will remain elevated beyond the Lunar New Year in 2022 persist for as long as the global imbalance in demand-supply of products shipping capacity exists.
In light of this, Stifel analyst Ben Nolan posits that the shipping container rate will likely rise beyond 2022. He said, "Container craziness should abate, although we expect not until sometime later next year or perhaps even in 2023." This may further increase inflation rates because the higher the costs of containers, shipping, hauling, and storage, the higher consumer prices and overall inflation.
Freight prices will continue to increase as long as the international logistics challenges exist, especially container shortage and high container rates. But experts assert that the availability of new container capacity and shipping vessels will ease price pressures, but not before 2023.
Since the beginning of 2021, new orders for container vessels reached a record high of 229 ships with a total cargo capacity of 2.2 million TEU. When the new capacity is ready for use, in 2023, it will represent 6%. The new orders for shipping vessels are estimated at almost 20% of the existing capacity, but they won't come online until 2023. This makes many experts forecast 2023 as the potential year when efforts to end the pandemic effect may start to materialize.
In effect, the supply chain delay and high freight costs challenge experienced by Amazon sellers is likely to continue as long as the issues of increased consumer demand and limited shipping capacity as well as high container cost and other problems persist. This may run into 2023, as predicted by experts.
When the pandemic effect on the logistics industry ends has no definite answer due to the lack of preparation for unforeseen circumstances like the pandemic. But the current situation of the international logistics indicates that it might be almost impossible to end the pandemic effects in 2021, and the hope for a change looks bleak in 2022. We might witness a potential beginning of the end to the pandemic effects provided no regression is experienced in the move to resolve the disruption in the international logistics industry.
On a positive note, by utilizing the several benefits of digitalization, you can effectively manage the pandemic's effect until international shipping fully gets over it. To enjoy these benefits, you will need to employ a freight forwarder's service that provides multiple digital solutions. Working with a digital-savvy freight forward guarantees efficient service and effective monitoring of your shipment until it reaches its final destination. With digital solutions, amazon sellers and other ecommerce sellers can address the issue of pandemic-driven supply chain delay.
So when choosing freight forwards to work with, ensure the freight forwarder offers the following solution:
Transparency: Be sure to choose a freight forward guarantee transparent service that allows you to get clear information about the whole shipping process. They should offer open services from your shipment quotation to shipment transportation and final delivery.
Visibility: Your choice freight forwarder should be one that will provide you with complete visibility of your shipment till it gets delivered. Work with a freight forwarder who provides you with a 24/7 shipping portal that allows you to track your air freight or sea freight transported shipment.
Real-time Tracking: There are digital platforms that allow you to track your shipment in real-time till it arrives at Amazon FBA centers or your preferred delivery destination. This puts your mind at ease concerning the safety of your shipment. Thus, ensure your freight forwarder offer this solution before securing their service.
Online Payment: You can reduce unnecessary time spent on manual payment by working with a freight forwarder with a digital platform that makes it easier and faster for you to request an offer, book shipment, and make payment online.
Freight Forwarder Warehouse: When shipping from China or any part of the world to the US, ensure the freight forward you use has a warehouse in the US. This further guarantees the safe keeping of your shipment after arriving in the US before it gets delivered at your final destination.
How can Forceget help?
This article was written by Burak Yolga, Founder of Forceget Digital Freight Forwarder, who has a bachelor’s degree in international business and an MBA from when he studied in Paris. He lived in China and Hong Kong for 7 years and visited more than 50 trade shows and 500 factories in more than 40 Chinese cities. Following that, he moved to Miami, FL and where he now spends his time helping Amazon FBA sellers with their shipments from China.
Forceget is a top choice as an Amazon logistics service provider because it is an Amazon-focused Freight Forwarder. We offer a broad variety of services for Amazon sellers, with a network of warehouses both in the East and West Coasts of the US, Canada, and China. Warehousing, full container load (FCL), and less than container load (LCL) transportation to fulfilment facilities are all included.