Global supply chain pressures continue to ramp up, even as the lockdown in Shanghai shows signs of conclusion. Freight traffic volumes from the city of 25 million people have slowed to a crawl. Shipment backlogs have ballooned at the Port of Shanghai due to restrictions imposed as part of China's zero-Covid-19 policy.
The severe reduction in export activity closely follows a period of bottlenecking at U.S. West Coast ports in early 2022. However, the effects of these extremes have yet to be fully realized by businesses all over the world. As pressures mount, supply chains face newer and greater challenges than ever before.
Slower Exports, Higher Rates
Container freight rates that are already high could increase even more as supply chain disruptions persist. As exports from China account for 15 percent of the world's manufactured goods, shortages are likely to worsen, compounding the additional cost of inflation. The Shanghai lockdown exacerbated existing shortages of global goods, raising lead times for deliveries to uncomfortable levels.
Even before China's last lockdown, transporting freight from Asia to the U.S. West Coast took twice as long as it did when the pandemic began. Add to that the exploding shipping rates, which are six times what they were in the first months of 2020. Businesses that are not strategically sourcing goods will experience ever greater supply chain pressures as time wears on.
Supply Chain Pressures Intensify
The latest backlog in container freight from Shanghai will arrive on the West Coast, threatening another wave of congestion this summer. As U.S. ports operate with limited staff and expensive constraints on their distribution channels, there is no end in sight to the supply chain pressures being felt worldwide.
So how can your business not only endure but prevail over the course of months and years of uncertainty? Morgan recommends two effective solutions: nearshoring and Inventory On Demand®.
Nearshoring
By building strong relationships with manufacturers and suppliers close to home, you can help mitigate the effects of the global supply strain on your organization. With the cost of shipping fuel rising 66 percent, the incentive to minimize the distances traveled by your shipments increases. Building these relationships is a simple matter when you've partnered with a third-party logistics (3PL) provider.
Partnering with a 3PL has become necessary for almost all organizations as they prepare to weather the worsening storm of supply chain disruptions. Among other things, these supply chain and logistics professionals can assist you with nearshoring, transportation mode shifts, and inventory management. Many 3PLs offer dedicated fleets, so their partners don't have to worry about carrier relationshipsor understaffing.
Inventory On Demand®
Minimizing and postponing your ownership of inventory helps your organization cut costs and reduce liability. Outsourced inventory ownership and supply chain finance solutions can provide you with the breathing room your business needs to re-allocate your resources in times of turmoil. With a 3PL partner, you can source goods strategically and take advantage of bulk buying while allowing you to avoid the costs and risks that come with holding inventory.
A 3PL partner also makes consolidating shipments easier. The valuable partnership can help you shift to less expensive, more sustainable transportation modes and guard against spikes in demand. If supply chain disruptions compound and threaten to choke your business, 3PLs enable you to spot those problems more quickly and respond to them with confidence. In this age of supply chain pressures, your 3PL partner could mean the difference between your organization's success and failure.
For more information about how Morgan can shore up your operation and help relieve your supply chain pressures, contact us.
