By Vijay Kurup
The going has been rough and the outlook bleak. Cranes on the wharf could be seen standing idle. There was no space in the yard for the vessels to offload the import containers. In the last two years, just about every link in the global supply chain was snarled into a logistical knot, creating multiple trade bottlenecks along major routes. There have been large port shutdowns, unprecedented in duration and number. The disruption has been severe and the consequences devastating.
With the pandemic spreading its tentacles, the manufacturing units were the first to stumble. Manpower shortage led to disruption of the manufacturing schedule in the early days of the pandemic in 2020. Major manufacturing centers of China, South Korea and Taiwan and giant industrial centers of Europe were hit hard by an exponential fall in production figures. The effect on production manifested itself in myriad ways. Manufacturing of computers in China fell dramatically due to the shortage of chips, which were being manufactured in Taiwan and Malaysia. Manufacturing of vehicles also slowed down. All of which had a worldwide impact. Far away in the US, mundane items such as toilet paper, straws and critical items like protective gears for doctors and medicines were in short supply. In India critical medical equipment was not available off the shelf.
In a reflex reaction, the falling production in manufacturing goods, prompted the shipping lines to scale back on its capacity. It was the first ominous sign of the compounding effect of the disruption in the supply chain to follow.
Despite the pandemic, the consumer demand for goods remained unabated. When the demand for containers picked up, it only led to worsening of the logjam and delays, which had a domino effect, snapping the links in the supply chain across the world. Empty containers for export were suddenly in short supply.
The unflagging demand for consumer goods clogged the supply chain that reverberated along its length. The goods that were manufactured began to be cluttered up in warehouses owing to non-availability of containers. The goods that were stuffed in containers could not be shipped due to wayward vessel schedules and vessels omitting ports. The export containers that were loaded on the vessels were held up at transshipment ports. Major transshipment ports had congestion problems, which led to imposition of congestion surcharges at the Southeast Asia ports. Quite often due overbooking of mainline vessels, the loaded containers got rolled at the transshipment ports. At times they are forced to exercise a triage of services, preferring to load containers on the higher paying routes. Some regions like the Middle East were avoided in preference to the lucrative Asia-Europe or Asia-US trade lanes.
Finally, even after passing through these gauntlets of problems, an armada of vessels was forced to remain at the anchorage at the destination. The decline in liners’ vessel schedule performance has been the leitmotif in the year 2021.
Vessels have been idling in major ports around the world. At one point in November, a total of 111 container ships were idling at sea around the ports of Los Angeles and Long Beach, waiting to dock and unload. The figure broke all previous records. Ningbo, the world’s third-busiest container port, had been partially closed due to worsening conditions. Congestion was once again rearing its head in the ports of Shanghai and Hong Kong. Key ports across Asia – Xiamen, Ho Chi Minh, Port Klang, Kaohsiung, Singapore were once again caught up in a vice grip of congestion.
Girish Singla, Director RTW Logistics Pvt Ltd, said that even today there is no vessel schedule integrity. Normalcy has not returned as yet, he emphasized. “If I were to book a container today, chances are that I would be able to load the container in about 4 to 5 weeks time,” he said.
Freight charges reached stratospheric levels, unprecedented in shipping history. The freight charges to any destination more than quintupled. Even at those levels of freight, the empty containers often were not available.
Many lines have posted record profits. The profits of AP Moller-Maersk reportedly were up six fold in the third quarter. French carrier CMA CGM registered a net profit of US$5.6 billion for the quarter ended September 30, 2021. MSC too posted record profit. The combined operating profit in the first quarter of 2021 of the eleven shipping carriers was a staggering US $16.19 billion. All the lines were sanguine to end the year on a higher than normal profits.
But the woes did not end even after the cargoes were discharged at the port. Lack of trailers, manpower and warehousing had further added to delays in delivery of cargo.
The delivery times for manufacturers worldwide declined exponentially. The global delivery time index in the month of October, declined to 34.8 points. A figure below 50 was symptomatic of extended delays in delivery of shipments.
The wedging of the ship, in the Suez Canal by a giant container vessel, further exacerbated the already grim situation. It not only brought to the fore, how delicately the supply chain was strung, but also emphasized the numerous supplementary supply chains that were linked together for the manufacture of a single product. The supply chain over the years had unobtrusively lengthened and had become more complex.
Take for example the manufacture of a Barbie Doll. The quintessential American doll was never an ‘American citizen’. Her citizenship remains blurred. The doll was made in japan. Her dress came from Taiwan. Her curvaceous figure was manufactured in China. Her flowing blonde hair was of Japanese origin; the coloring pigments came from America. Disruption in any one of the supply chains would bring the entire production to a grinding halt.
Thus in an era where the production of a product is dependent on multiple supply chains, it is not surprising that an item weighing just about 10 gms could halt the production of any high end luxury cars. The shortage of computer chips, which comes from Taiwan, had created a global shortage of vehicles.
Amidst all this gloom and doom, the stakeholders in the logistics chain have found different ways to circumvent the upheavals in the supply chain caused by the pandemic. Coen Van Der Maarel, Managing Director, India, Sri Lanka and Maldives, Kuehne+Nagel in a mail response to Maritime Gateway said, “The current supply chain disruptions are a result of multiple factors causing a ripple effect through the industry, resulting in delays at ports across the world. While the Covid-19 pandemic has exposed vulnerabilities in global supply chains, Kuehne+Nagel has risen to the challenge by developing solutions to better manage demand and supply, and providing our customers and partners with the agility and contingency plans to keep goods moving. This includes the use of multi-modal routes, digitalisation, visibility tools – all complemented by our deep understanding and experience in the industry.”
Global container shipping line Hapag Lloyd too explored inventive ways to cut through the morass of logistics obstacles. Tim Seifert, Director Corporate Communications Spokesperson for the line, explained to Maritime Gateway, “ We moved capacity to high-demand trades and optimized our service network further. We re-routed cargo through alternative gateways to bypass congested ports. We bought second hand tonnage, chartered additional vessels and deployed extra-loaders We have ordered new containers – over 625.000 TEU in 2020 and 2021 to satisfy demand – and increased repair and maintenance of older ones We have 12 new 23,500+ TEU vessels on order, which will add another 280,000 TEU capacity to our fleet. The first vessels will be delivered in 2023. We added workforce, IT capacity and introduced new digital solutions to improve customer satisfaction and service quality.
Vikrant Dogra, Senior Director-Strategy, Quality & Analysis-ISC, DSV had a different approach. Explaining their strategy to Maritime Gateway, he said, “In DSV, we have tried to mitigate the impact of the disruptions by ensuring that there was a core group of employees that continued to attend office with all safety precautions met through this period. This included our field staff as well as our customs clearance teams. And most of the time the complete senior management was also physically present in their respective offices. We were probably one of the few forwarders, local and MNC, who had a physical presence in their offices across the country.
Shubhendu Das, Managing Director of Hellmann India, focused on creating a high-level response team to handle contingencies. He said, “Strict WHO protocols were maintained. All employees were covered by insurance for Covid. Further they focused on bringing in flexibility in their working environment. The employees were given the option to work from home and were required to come to the office only when it was essential.”
The turmoil in the logistics world had spawned a new word ‘Containergeddon’. The logistics community was eager to return to normalcy. Invaluable lessons were learnt, albeit in a hard way. The question that was on everybody’s mind was what would be the strategy going forward?
Coen Van Der Maarel responded by saying that their customers were utilising a combination of sea and air transport options to keep their goods moving, and tapping on their seaexplorer platform to visualise the best routes, and optimise their approach.
Tim conceded that while the operational challenges remained for this year, a normalisation was not expected before the first half of 2022.
But moving forward the modus operandi would be to “continue to implement countermeasures and remain clearly committed to our quality goals. We take all necessary actions to maximise the utilisation of our fleet and the allocation we produce.” In the future course of action he said that they would further intensify digitisation and continue to follow a prudent financial policy, work on bringing down unit costs, continue to pursue market opportunities and commit to further reduce their CO2 footprint.
Dogra said, “Predictability, transparency and creativity will be the key qualities that we, as an organisation, are focusing on. To provide a certain amount of predictability to our customer’s supply chains, it is imperative for us to have allocations and BSAs with all our key carriers. During the pandemic, our customers appreciated the fact that we had the ability to hold certain allocations with our carrier partners, which provided a certain amount of predictability to the movement of their shipments. This approach will be a key point for us going forward.
Going forward what would be the modus operandi in terms of an insurance against similar unexpected contingencies? Coen Van Der 13 Maarel was of the opinion, “Through working with our customers and partners to overcome these new challenges, we have learnt the importance of long-term partnerships with other players in the industry to foster a strong, resilient and sustainable network to keep goods moving. Improving infrastructure and technology to mitigate and safeguard against newfound vulnerabilities is important, so that the industry as a whole continues to grow, improve efficiency, and weather further disruptions or delays.”
Tim felt that, in a globally networked world economy, they also needed to be well prepared to react quickly and flexibly to developments like this. He said, “Business continuity management (BCM), for example, helps us to do this, as do teams that can be activated quickly in the event of emergencies or critical issues, analyse the situation and decide to what extent our business or fleet operations need to be adjusted. Customer proximity and transparency are of utmost importance. Digital solutions are more important than ever and will be further developed. Our seafarers are the backbone of global shipping – we are doing everything we can to bring some normality back into their lives as quickly as possible.”
DSV said that predictability, transparency and creativity would be the key qualities that they, as an organisation, were focusing on. To provide a certain amount of predictability to their customer’s supply chains, it was imperative for them to have allocations and BSAs with all our key carriers. During the pandemic, their customers appreciated the fact that they had the ability to hold certain allocations with their carrier partners, which provided a certain amount of predictability to the movement of their shipments. This approach would be a key point for them going forward.
Before the crisis, DSV had been investing heavily on ‘myDSV’ (their tracking tool). Therefore, it was easy for them to provide customers tools, which gave their customers visibility to their shipments as well as a feeling of control. Pre-pandemic, their customers were averse to using their trace and trace tools, expecting DSV to provide them with daily manual DSRs. The unpredictability during the crisis haD made their customers realise the usefulness of those tools, and they were hoping to be able to build on that trend.
Through this pandemic period, Das realized that the supply chain at both international and national level lacked resilience, resulting in a huge vacuum in demand and supply. He also came to realize the importance of having liquidity, the ready availability of which “enabled one to go that extra mile”. It was necessary to have strong collaborations with partners, be it a shipping line, CFS operators etc. “Gather trusted partners who would stand with you during good times and not so good times,” he emphasized.
“In Hellmann, digital transformation was always in the process,” Das Said. “But the pandemic made us expedite the transformation. “We have already started investments in AI, IOT, robotics and block chain.” Further, he said, “our operating models are more agile and flexible.”
Despite the upheavals, the exports from India have been rising consistently over the last few quarters, after a fall in the early stages of the outbreak of pandemic. India’s merchandise exports in September 2021 was USD 33.44 billion, an increase of 21.35% over USD 27.56 billion in September 2020 and an increase of 28.51% over USD 26.02 billion in September 2019.
India’s merchandise exports in April-September 2021 was USD 197.11 billion, an increase of 56.92% over USD 125.61 billion in April- September 2020 and an increase of 23.84% over USD 159.16 billion in April-September 2019. The export achieved nearly half of this fiscal’s export target of USD400 billion set by the government.
The disruption in the supply chain caught almost everybody off guard. It came like a juggernaut, upsetting everything before it. Desperate times called for bold innovative measures to break the logistics jinx. Some sank, but many reinvented and found ways to circumvent the looming obstacles. The takeaway message from these catastrophic times was to minimise disruption through accurate prediction, increased digitisation, transparency and reacting quickly and flexibly to untoward developments. The imperative need was not to let disruption overwhelm you again. Once bitten twice shy.