Supply Chain Archives | Page 81 of 91

Air freight airports and ground handling hubs grinding to a halt – and that’s everywhere

Nov 10, 2021 | Air, Supply Chain

Sustained high demand, diminished capacity, COVID-safe work practices and apparent labour shortages, continue to place immense pressure on UK, European, US and global air freight hubs, creating congestion, from Heathrow to Azerbaijan.

While there are different situations at different airports, the demand for air cargo is exceptionally high and ground-handling operations are proving to be consistently ineffective at servicing the upturn in freighters, and passenger freighters, with particular problems at Heathrow, Amsterdam, Brussels, Frankfurt and Liege. And that’s just in Europe.

Despite the significant congestion that is impacting air cargo hubs globally, there is every likelihood that the already exceptionally high air freight prices will climb further as supply chain congestion drives further ocean-to-air conversion for essential peak inventory. ‘Distressed ocean freight’ has one repair option on the deep-sea destinations and origins and that is conversion to air freight which we are seeing daily driven by consumer and manufacturing demand chains needing stock, inventory and components to function.

The resumption of passenger operations in the critical trans-Atlantic market is very welcome, but trans-Atlantic supply has little impact on the China outbound routes that comprise the bulk of holiday peak volumes and it is not expected to result in a sudden easing of the essential air cargo market. Many aircraft were already flying routes that were profitable from cargo alone. It is just that they will now finally fill up the upper decks of the aircraft as traveller restrictions are withdrawn and they are allowed to resume global access and passenger sentiment in flying begins to resume.

London Heathrow is facing significant delays, as the cargo area is unable to cope and waiting times for vehicle collections and deliveries can be anything from five to ten hours, with the ever-present risk that the driver will ultimately be turned away. We are experiencing drivers running out of their legal hours of driving and having to replace with new shift drivers before they have even collected or delivered their air freight cargo whilst sitting statically outside the airline warehouses at the airports.

We are aware that some handling agents are moving airline pallets to London Gatwick to break down and return loose cargo to Heathrow. In theory, this practice should ease ground-handling pressure at Heathrow, but in practice, it actually adds further delays and increases the risk of cargo being misplaced.

It is beyond frustrating to locate and secure scarce air freight space, to get our customers’ consignments to destination on time, only for them to be delayed on arrival by 2, 3, 4 and even 5 days as we attempt the final mile of delivery.

The situation can only be described as discombobulating and illogical. But unfortunately, this is the reality of the air freight supply chain presently, as widely reported in the trade press over recent days and weeks.

Whenever possible we are routing cargo via Birmingham International Airport, which continues optimum operations, to keep our customers’ goods moving, as well as clearing cargo and moving it to our general-purpose and various external temporary storage facilities (ETSF’s).

Overall the market is not as good as it should be, with issues all over the place at the major US, European and Asian hubs and the likelihood is it will get worse, particularly when the handlers are short-staffed in many facilities, due to COVID operating restrictions and the ability to ensure that resource can be deployed for the surge in demand.

In their defence, ground-handlers maintain that airline schedules and capacity are constantly shifting, which restricts their ability to forecast requirements and means that they cannot ensure there are sufficient numbers of handlers to meet the arriving and departing aircraft that they would expect with schedules during ‘normal times’. This actually reflects the ongoing situation in the ocean freight market with the circumstances that everyone will be experiencing in surface mode over the last year. However, during the current peak season, this is now filtering into the air freight environment.

They also suggest that they are unable to flex their prices like the airlines and while lots of money is being generated on air cargo, it’s not in handling, where the cost base has gone through the roof but pricing and revenue have remained relatively static.

Predictions are that the air cargo boom will continue well into next year, and possibly 2023, as it may take that amount of time for the passenger schedule to return to pre-COVID levels.

We know that cargo that ends up in limbo in on-airport warehouses exacerbates the congestion crisis, but quickly moving cargo off-airport depends on a ground-handling workforce that is of sufficient size to provide efficient operations to the cargo aircraft, preighters and PAX aircraft arriving at those major cargo hubs.

Despite the massive challenges, our air freight team continue to get time-sensitive shipments lifted at origin and work tirelessly to have it released asap after arrival. As soon as we identify an issue, regardless of the airport, we work around the problem to deliver the best solution and avoid obvious bottlenecks and turmoil.

We partner and engage closely with our global network to monitor market capacity and identify opportunities to use regional airports, that will benefit our customers ensuring that expectations and timelines are met – regardless of the challenges.

There are solutions for every critical shipment, please call Elliot Carlile or Grant Liddell to discuss your situation and for further insights and advice. We will have all options available and an intelligent and creative remedy!

The impact of the COVID pandemic on global logistics

Nov 10, 2021 | Coronavirus, Supply Chain

The pandemic has underlined the critical importance of the global supply chain, in meeting critical PPE and medical needs, as well as satisfying consumer demand and the challenges in keeping goods moving efficiently along it.

The pandemic is creating new challenges for supply chains, as it keeps them working under unrelenting pressure, bringing to light previously unseen and unacknowledged vulnerabilities.

The ability of ports and supporting infrastructure to work at full capacity has been undermined by staff shortages due to quarantines and COVID-safe work practices.

The pandemic has accelerated and magnified problems that already existed in the supply chain, such as the pay and working conditions of critical workers, like HGV drivers.

Demand for vessel space and sea freight costs soared on every trade route as the grounded passenger aircraft fleet removed over 50% of air freight capacity at a stroke and to make a bad situation worse the amount of sea freight capacity available, was cut further due to containers and the vessels that carry them, being out of position.

Hopes remain that cost pressures will lessen, as consumer spending shifts from products back to holidays, eating out and other services. And while freight rates are very likely to remain higher than before the crisis, they will not remain at the current levels.

2020 - The COVID outbreak’s supply chain impact

Brexit seen as a major trauma to European logistics platforms.
The first quarter lockdown in China, prompted carriers to swiftly withdraw vessels.
As global lockdowns followed the carriers made further massive cuts to sea freight capacity.
The global passenger aircraft fleet is grounded, removing over 50% of belly-hold capacity.
Massive and unexpected demand for freight space returns mid-year as consumers buy products, as they are denied access to services.
Shipping lines start to return vessels, but they are now vastly off schedule.
Reacting to critical global PPE demand, airlines convert aircraft (Preighters) to carry cargo.
Ocean capacity is massively constrained, leading some lines to cancel longer term contracts and push shippers and importers to the FAK (Freight All Kind) spot market.
Ocean and air freight rates continue escalating to first quarter levels up >1000%.
Vessel schedules are even less reliable, adding to congestion at ports and extending transit times, which means empty containers are not returned to the areas of manufacture creating further delays.

2021 - Where we are now

Freight rates have remained firm, despite some expectation of them softening post-Chinese New Year and into early Q4.
Airlines have remained busy, even without passenger support and air cargo rates have increased significantly as their sole source of income.
Lockdowns affect manufacturing and lead times, with infrastructure congested.
Extended ocean transits and shortage of equipment effectively cuts capacity by 25%.
Reliability of carriers is totally lost with just 30% vessels on schedule and transits massively extended.
Global port congestion disrupts vessel arrivals and departures and handicaps the return of empty containers.
Inland road haulage and port-linked rail services in the UK, Europe and North America become congested .
Shortages of HGV drivers creates additional issues at destination and adds to congestion resulting in storage, detention and demurrage costs.
Airlines still operating predominantly on cargo income and pricing at record levels entering peak season.
Freight rates on all modes remain historically high, creating a ‘pay to play’ environment, with carriers focusing on the most profitable lanes and markets.
Power shortages and periodic power cuts in China, adds pressure in key manufacturing regions.

2022 - Looking to the future

As passenger travel opens up globally expectations would be for pricing to soften, as passenger income returns and belly-hold space adds to freight market capacity.
Many carriers are very bullish about 2022 and will not currently offer any form of pricing for 2022 contracts which will unwind over the final quarter.
Limited numbers of new-build vessels are scheduled to enter service before the end of 2022, so capacity is likely to remain restricted.
Inflation may soften consumer demand, reducing pressure on global logistics, in all stages of the supply chain, including manufacturing.
Carriers will continue pushing for longer term two year contracts and either decline to offer 12 month contracts, or refer customers to the FAK/spot market.
Confident shipping lines, eager to continue growing the ‘bottom line’ and airlines keen to recoup losses will maximise revenues from cargo movements.

In summary...

The pandemic-linked supply chain challenges described above, that have driven up prices and slowed the global economic recovery, will lessen over time. But any recovery will be fragile and easily undone by unforeseen events, like the shortage of HGV drivers in the UK and China’s drive for zero COVID cases.

By 2023 (possibly late 2022) the COVID-19 situation should be under control and consumer demand steady, providing stability in global shipping, operations and costing.

The capacity of the global container fleet could potentially grow by 20%, as new vessels are delivered and schedule reliability will have returned, but how much tonnage the the 9 major shipping lines decide to withdraw or retire from the market, will dictate what volume, if any, is actually added.

Political and global events, not yet apparent, may have a huge influence on global supply chains, on all modes and in all regions of the world.

Local and global issues are intertwined, due to the fragile state of ocean and air freight markets, demonstrating just how unpredictable the movement of your goods has become.

The shipping lines are expected to declare in excess of $150 BILLION pre-tax profits in the current financial year and it is unlikely they will want to give that up, considering what they have experienced and learned over the last 18 months on market dynamics and influences. They are in control of events and consequently their own success.

It is widely accepted that the current supply chain challenges and high freight rates, across all modes, will continue into next year without much compromise.

Managing supply chains is no longer a back-office function, largely ignored and taken for granted, because business survival depends on a a high-functioning supply chain run by professionals with the experience and critical support of dependable partners.

Metro will always provide you with the best alternatives and options, supported by a proactive team, leading-edge technology and open communication. Supply chain solutions that are designed around you, your situation and needs.

For further information and to discuss your ongoing requirements please contact Elliot Carlile or Grant Liddell.

Supporting environmental transparency

Nov 10, 2021 | Environment, Metro, MVT, Supply Chain, Technology

Environmental reporting standards for business have been high on the agenda at the UN’s Climate Change Conference – COP26 – currently underway in Glasgow and Metro support the drive for businesses to be open about their impact on the planet, as transparency is an essential precursor for reaching global solutions to a global problem.

Companies’ response to climate change is arguably the most pressing issue facing society, which is why the UK government has joined 38 international partners to welcome the establishment of new international sustainability reporting standards at COP26.

As a disclosing company, Metro is among the 13,000 corporations that have committed to environmental transparency, by disclosing our environmental impact and working to reduce greenhouse gas emissions, safeguard water resources and protect forests.

While world leaders gathered to discuss the future of climate change and their negotiating teams are hard at work at #COP26, we hope that our customers, and the wider industry, will also take action on climate change, because it poses a present and future risk to supply chains.

It is only by measuring our environmental impact, that companies can understand and mitigate now, to prepare for the future and ultimately remain competitive – especially as there is increasing demand for goods, services and suppliers with a reduced environmental impact.

Metro’s MVT Eco module monitors the energy emissions, emission costs and CO2 equivalent emissions, of each consignment we move, by every mode, which means that Metro customers can monitor the environmental impact of their supply chains and participate in offset projects that will eradicate their CO2 footprint.

The MVT ECO module is a cloud-based solution, that is available, free-of-charge, to all our shippers on their MVT dashboard, where they can view key eco statistics related to their movements, to see which areas will benefit most from emissions offsetting and where efforts can have the most impact.

To request a demo or discuss your requirements, please contact Simon George, who leads our technical solution team, or Claus Rasmussen to discuss carbon reduction strategies and the availability of offset projects.

VIEW MVT ECO WEB PAGE

Asia-Europe congestions adding to transit delays and schedule confusion

Nov 10, 2021 | Sea, Supply Chain

Congestion at both ends of the critical Asia-North Europe (this still includes the UK) shipping trade is wrecking vessel schedules, with the average delay of container ships completing a round-trip loop rising by over two weeks, as carriers skip congested ports at both ends, and quite often in between.

These extended transit time delays are removing much-needed capacity from the sea freight market, with analysts suggesting that the three alliances would need to add a further 44 ships of between 14,000 to 24,000 TEU to cover the delays and maintain a weekly sailing frequency on all 17 Asia-North Europe loops.

In essence up to a quarter of total container shipping capacity has been removed, with the extended transit situation. The equivalent of parking up and idling 25% of the world’s global container shipping fleet to put it into perspective. Unbelievable a few years ago – but reality as of today.

Comparing the voyage durations for ships on the 17 Asia-North Europe loops arriving in Asia, for their next westbound sailing, during a week last month, shows that they needed up to 54 days additional time to complete a round trip, with delays averaging 18 days. This, therefore, affects both imports and exports – from and to everywhere – on the trade lanes between Europe and Asia. It is unavoidable not to.

Measuring the delays on a full round trip revealed the massive impact of port congestion on lines’ schedules, with an average of seven days’ delay for the OCEAN Alliance, 19 days for 2M, and 35 days for THE Alliance.

THE Alliance’s performance is particularly marked because it has not been skipping ports in Europe and trying to maintain its original rotation. But Rotterdam, Hamburg, and Antwerp have added significant delays because these ports were far more congested than smaller ports like Zeebrugge or Wilhelmshaven that are used by the OCEAN Alliance.

A significant and often overlooked factor in the operational stress that creates port congestion has been the excessive growth in call sizes over the past year and the sheer volume of containers that need to be loaded and discharged on a single vessel call.

While container ship volumes on the Asia-North Europe trade increased 11.3% year over year, this was just 2.8% above the 2019 total, but more vessels are also not a solution to the congestion. Due in part to the time between order, build and delivery of new vessels and in part because injecting more vessels would run the risk of simply compounding existing bottleneck problems. It’s a conundrum that is not easily solved.

Maersk warned, and other carriers followed, in an October market update that congestion would force them to join other carriers in implementing ad hoc port omissions, to try to maintain schedules, with extra loaders deployed to sweep up cargo and minimise the delays that customers are experiencing.

It does seem that decisions on port call omissions are not being communicated to freight booking desks and consequently, shippers are being offered space on sailings for which cargo may only arrive at the original destination port several weeks after the advertised date.

We have been offered space on MSC’s Shogun/Maersk’s AE1 sailing from China in early November, on the 19,224 TEU MSC Erica. MSC is advertising a transit time of 29 days to Felixstowe, while Maersk is quoting a transit time of 46 days for the same vessel.

We have seen similar errors from the Ocean Alliance and THE Alliance partners because their schedules have not been updated and it’s a major problem because shippers may make inventory calculations based on incorrect ETAs.

For the latest information and updates on your ocean freight planning and supply chain for the end of the year and 2022 please contact Chris Carlile or Grant Liddell for immediate advice and the latest intelligence relating to your global freight movements.