2023 Year of the Rabbit

<strong>Chinese New Year + COVID escalation = supply chain disruption in Asia</strong>

Jan 18, 2023 | , ,

If travel for the Lunar New Year holidays increases COVID transmission, we will see large numbers of infected workers having to quarantine, which will delay their return to work and factories, hauliers, terminals and ports that would traditionally restart operations by mid-February could be shut significantly longer, with export and supply chain delays.

This Sunday, the 22nd January marks the start of the Lunar New Year and is the trigger for Chongqing-Chunyun, the Chinese New Year Migration, which is the largest annual human migration on earth, with hundreds of millions of people, working out of their hometowns, hurrying home to be with their families for the two-week holiday.

Factories and most other parts of Chinese society close down for the duration of the holiday (which is based on the lunar cycle), causing a pause in exports leaving the country, which is why traditionally we would see a spike in freight volumes - and particularly - air in the run up to CNY. 

China’s economic growth of 3% in 2022 was the weakest since 1976, prompting the abrupt lifting of China’s strict zero-Covid policy in December. Unforeseen by many although encouraged for a long time.

With the recent rapid dropping of COVID restrictions across China, workers are more free to travel than they have been since 2020, which has led, predictably, to a surge in infections and with high levels of COVID in travellers leaving China for business and vacation, countries including the UK have introduced testing for incoming flights from China. Restrictions haven’t just been ‘eased’, but they have been withdrawn entirely in some areas. This is rapid deployment of the new measures.

If New Year’s travel does lead to increased transmission across the country, which logic dictates it is hard to avoid - large numbers of infected workers will need to quarantine, delaying their return to work, with means that supply chain infrastructure and factories that would traditionally restart operations by mid-February could be side-lined for significantly longer, resulting in export order and shipping delays.

Some importers are still carrying plenty of inventory and may not be impacted, but for those with products that are selling well, they may get caught up in the shortfall and a scarcity of bestsellers.

At the end of December, China stopped publishing daily COVID transmission data, possibly to conceal negative information about the pandemic circulating. But shippers will probably know sooner than just about anybody, when they don’t get the deliveries they were expecting out of China.

We have seen many factories and manufacturing sites throughout China shutting early this year already, either because they were quiet, or to give workers an extended break. This has contributed further to the lull in container movements, in what should traditionally be a peak week prior to the CNY celebrations. 

There is, as a consequence, a huge number of shipping line schedule changes, blanking’s, suspensions and withdrawals over coming weeks and months, that will impact on vessel departures and planning reliability in China and across Asia. As a result, it could take a long time to unwind, with return eastbound voyages in March and possibly beyond.

Economists have warned over the state of the global economy in recent months and the International Monetary Fund (IMF) has urged Beijing to continue reopening its economy.

The IMF believe that if China stay the course - and do not re-impose COVID restrictions - by mid-year or there around, they will turn into a positive contributor to average global growth.

However, the full reopening of China's borders is likely to be delayed until international restrictions against China-originated travel are dropped.

On the upside with travel restrictions from and to China being relaxed the air cargo market is likely to see benefit with belly-hold capacity returning to pre-pandemic levels, as tourists look to travel once again, on passenger flights being re-introduced on routes that have been closed and which should result in reduced air freight costs, to and from the region.

As China emerges from its COVID stasis, we have fixed price and long-term capacity agreements in place with our partner carriers, to deliver resilient, consistent and reliable supply chain solutions.

Metro’s cloud-based supply chain management platform, MVT, simplifies global trading, by making every milestone and participant in the supply chain transparent and controllable, down to individual SKU level.

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile for all options relating to current freight profile movements to and from China.

Idle containership capacity hits all time high

<strong>The new logistics normal in 2023; Part 1</strong>

Jan 5, 2023 | , ,

For almost three years shippers, forwarders and carriers, across all modes, have battled unparalleled global supply chain disruptions and, as the massive consumer driven volumes finally subsides, some suggest that the “new normal” is manifesting on a global scale.

The desire for normality and the return to a shipping environment where it is possible to forecast volumes and budgets, without having to continually amend is inevitable after so much chaos. But the new normal, also means that change is a constant variable, with supply chains vulnerable to events ranging from bad weather, industrial action, COVID infections in China and the war in Ukraine.

As unprecedented consumer demand has been lessened by rising inflation and interest rates, international transport capacity has improved markedly, with analysts Sea-Intelligence reporting that about half of all shipping congestion has been resolved, and by that measure, a full reversal to normality should come by March 2023 - providing there is no added disruption, through unexpected global events or manipulation of schedules by ocean carriers. 

Barring problems sourcing raw materials and components, many manufacturers are anticipating capability to return to pre-pandemic production volumes in 2023, at levels that flatten the 2020–22 “spikes” seen in almost every aspect of industrial activity, from inventories to production to pricing. 

Abnormal demand drove spot pricing on all modes to record highs in 2021, but those short-term rates fell throughout 2022 in a multi-modal pricing correction.

Despite the lack of the traditional peak season, the return of some measure of seasonality to shipping in 2022 was welcome and it was reassuring to see the monthly volume changes, that were typical pre-pandemic. 

Lower demand, as a result of the anticipated world recession and already occurring localised regional and country specific recessions, will allow global supply chains to progressively improve, even if some bottlenecks remain in some regions. 

Some of the lower demand from shippers is a result of excessive inventory, resulting from earlier than usual orders for imports - to work around congestion - that would typically arrive in the second half of the year, which have created bloated inventories, that are still being drawn down. 

The sea freight capacity shortage in 2021, extended to a shortage of warehousing space near ports and moved further upstream throughout 2022, constricting 3PL and shipper warehousing space as the year went on.

Normalisation in supply chains will not be a leap backwards in time. The pandemic’s disruptions and the evolutions to deal with them have been too profound.

Three years ago the majority of consumers had never shopped online and now over 30% of us are doing it regularly and we’re not going back. The same is true for businesses.

It will also be interesting to see how carriers, especially shipping lines by the ocean freight mode, react and what strategy they adopt with restricting capacity and schedules. This is currently unwinding and will effect the majority of this year dependent on what actions they implement.

As such, shippers and their forwarders must continue to innovate, because we now know that companies get in trouble when they get too comfortable with how they’ve been doing things. You need to rock your own boat, because if you don’t, someone else will. You can be assured that Metro continue to design and create new solutions that are fit for purpose regardless of the current market situation and conditions – it’s what we do!

We sub-titled this article Part 1, because someone’s bound to rock the ‘normal’ boat and Part 2 is sure to follow and explain why.

We work closely with our customers to consistently enhance supply chain efficiency and resilience in five key areas:

Understanding – Creating supply chain solutions that draw on all options available in the evolving market.

Visibility – Monitoring critical time-scaled events to provide visibility across the extended supply network, with global control down to individual SKU level.

Agility – Increasing speed to market and accelerating the cash-to-cash cycle.

Flexibility – Adapting supply lines, new vendors, product flows and order data, from any location.

Contingency – Exception alerts and rules-based solutions, automatically correct non-conformities, or alert users for corrective action.

For specific information, or to discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile. 

We will continue to update on market conditions regularly and always bring the latest development to your attention so that we can ensure that we always deliver and perform to your expectations.

Picket

<strong>Labour disputes in the global supply chain (a winter of discontent)</strong>

Dec 14, 2022 |

Strikes and industrial action continues to plague ports, airports, transport infrastructure and international and domestic supply chains and while much attention has been focused on UK, European and North American situations, the wave of disputes have been spreading to Asia, South Africa, Chile and Australia.

The impact of last month’s three-day strike by Dnata and Menzies ground handlers at London Heathrow, wasn’t as bad as feared, after unions reached a pay-deal with Dnata.

Starting tomorrow, 350 Menzies ground staff are expected to stage walkouts at Heathrow, which will predominately affect flights from terminals 2, 3 and 4. The industrial action by baggage handlers employed by aviation supplier Menzies will take effect from 4am, Friday 16th December, and last 72 hours. UPDATED 16th December - This strike by Menzies ground handlers has been suspended as revised offer put to members, but Unite confirms further dates for action over festive period will still go ahead, if the deal is not accepted.

Tomorrow’s action at Heathrow is just one of a wave of strikes that are sweeping the country, threatening freight operations as workers across the transport network, Royal Mail and civil service take industrial action in ongoing rows over pay and conditions.

Staggered rail strikes in The UK, by a number of unions, will disrupt operations and service integrity, which will inevitably impact freight operations, while action by Royal Mail staff may disrupt the transmission of critical documentation.

Border Force members of the Public and Commercial Services (PCS) union will walk out for four days, from 23rd December but, despite them targeting two of our major airfreight hubs - Heathrow and Birmingham - we are hopeful that their action will not have much impact on freight.

In the UK dock worker disputes at Liverpool and Felixstowe saw massive drops in vessel calls and terminal dwell times more than double. The strikes in Liverpool have come to an end after a deal was agreed, but there has been no agreed resolution to the dispute in Felixstowe and the threat of further action remains.

South Korean truckers voted to end their strike last Friday, as it entered a third week, after realising that their bid to make a government scheme on minimum freight rates permanent was failing, and fears that their action had caused "astronomical" damage to the economy.

South African workers at state-owned port and rail operator Transnet agreed a pay-deal, after a two-week strike shut down ports including Durban, Cape Town and Coega had reduced vessel calls by 60%.

In the U.S. the unresolved West Coast longshore workers agreement continues to hang over supply chains, but the looming national rail strike, which could have caused untold economic damage has been averted by legislation. Meanwhile, dock worker strikes are affecting Chilean ports and a dispute involving towage operators threatened to close Australia’s ports until the courts intervened.

However you look at it these ‘strikes’ affect supply chains – globally – and we will ensure that you are best positioned to be aware of the potential impact. The situation is not unique to the UK, or even France, and hopefully stability and consistency will be restored early in 2023. We will provide the work arounds and best fit solution during this time of uncertainty.

While we continue to monitor all points potentially affected by industrial action, our focus remains the continuity of operations, to ensure that your supply chain is protected at all times.

To learn how we work around disruption and congestion, please contact Elliot Carlile, who can advise on our preparations ahead of threatened industrial action.

The eBL is moving closer

<strong>Metro lead the way with ocean freight electronic bill of lading</strong>

Nov 30, 2022 | , ,

Just weeks after the Electronic Trade Documents Bill was presented before Parliament, Metro has commenced its first trial shipment with an electronic bill of lading (eBL), on Hapag Lloyd, which was a first for the German carrier too.

Following large-scale frauds and disruption to global trade due to the impact of the COVID pandemic, the digitisation of physical shipping documents is becoming much more significant, with the Electronic Trade Documents Bill, which will allow for the legal recognition of electronic versions of bills of lading, currently working its way through parliament.

Ministers at last year’s G7 meeting agreed that paper-based transactions are “a source of cost, delay, inefficiency, fraud, error and environmental impact” in a bid to move towards global adoption of electronic bills of lading (e-Bills), which Mckinsey & Company estimate could save $6.5 billion in direct costs and enable $40 billion in global trade.

Unlike the paper bill of lading, which is time consuming, risky (can be forged/lost) and expensive, the eBL is secure and extremely cost effective, with a host of added benefits:

  • Reduced costs due to savings on postage and time to handle physical paperwork
  • No risk of losing eBL
  • Removal of costs associated with a complex procedure to release without the Original BL at destination, including weeks of D&D
  • Quick and secure transaction with one click of a button
  • Eco-friendly solution with no paper and physical movement
  • Same legal protection as an Original Bill of Lading
  • eBL can be tracked online, unlike paper OBL’s

The Law Commission was tasked by the Government to set out reforms to the legal status of trade documents and following a consultation period last year, the Commission published its recommendations in March, with the Electronic Trade Documents Bill now going through the House of Lords, before returning to the House of Commons to pass into law.

The Bill of lading serves three key functions:

  1. As a receipt, confirming that the goods have been loaded on board the vessel
  2. As evidence of the contract of carriage, between the ship-owner and the shipper and/or the lawful holder of the bills
  3. As a document of title to the goods.

The electronic bill of lading (eBL) Metro are currently testing fulfils the functions of a receipt and evidence of a contract of carriage and, when the Electronic Trade Documents Bill completes its passage, the eBL will also fulfil the function of a document of title.

In the vanguard of testing this new technology, so that Metro customers will be the first to benefit, the sea freight team will undertake further measured trials, including with shipments that involve banks in the release process and also with the full variety of partner ocean carriers that offer this option.

The first ‘trial’ customer said that they were “very impressed with the process” and Hapag Lloyd commented that “handling physical paper leads to processes that are cumbersome, outdated, time-consuming and error-prone. Hapag Lloyd has partnered with Wave BL to enable secure and quick BL release, saving costs for our customers. We firmly believe the future of the supply chain is offering digital solutions that are time and money saving, backed up by secure communication protocols.”

This is the future, now. The platform just needs confidence building, evidence that it is 100% evolved and that the integrity is unquestionable. We will continue to update and reassure.

We have been utilising similar models and platforms in air freight, with our partner airlines, for many years and this is an exciting evolution in the ocean freight environment.

Metro is developing the technologies and platforms that will integrate with electronic bills of lading (eBL) and members of the bodies that drive the technology standards and frameworks for a standardised industry e-bill of lading (eBL).

Simon George, Metro’s Technical Solutions Director and a member of the illustrious UN/CEFACT forum. “Even partial eBL adoption will save £ Billions, but mass adoption of an industry-standard eBL, requires robust technology, acceptance by governments, banks and insurers as well as open collaboration."

Please contact us for further Information and we will share the latest progess and updates and how this platform can benefit your own continued global trade growth ambitions.

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