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Container Crisis

There’s not a shortage of containers, just a shortage of thinking

“A container, a container, my kingdom for a container.” OK, probably not a direct quote, but maybe close to what you’ve been thinking recently as the world faces the fallout from ‘The Great Container Shortage of 2021.’

Naturally, COVID’s impacted the world’s logistics channels, and on a simplistic level, there’s a lot fewer containers to go around.

Commentators in the shipping industry have been quick to address the issue.

“Lately, those all-important containers are in short supply, wrote Tech Reporter Nicolás Rivero recently for Quartz.

Only, to say there’s a shortage of containers is a little wide of the mark. As far as I know, there’s no one hurriedly making new ones in a big factory somewhere.

The real issue is, they’re just in the wrong place.

And because of this, there’s been a hefty cost hike pretty much across the board. In fact, overall shipping costs have increased by 500% in the last two years.

COVID’s naturally had a part to play in this. But it’s not the only reason.

For why Keats, for why?

There’s been a huge mismatch in the timing of lockdowns across the world. And so given the ‘worldwide pandemic’, and technically all pandemics are worldwide, the speed at which independent governments moved to shut borders and imply tariffs differed greatly.

Our antipodean cousins in New Zealand were perhaps the ideal example of how to deal with the flow of human infection.

But stopping the public from moving around is an altogether different beast to maintaining the movement of goods, whilst limiting human working activity at the same time.

There’s perhaps less of a precedent to learn from too.

If you could liken international shipping to anything, it might be the flow of blood cells around a body. It’s great if your heart, in this case, China, is pumping them out. But a blockage in one part of the system, like Europe, is going to cause havoc at some point.

Add to this an increased demand for goods during lockdown from Europe and the US, particularly goods manufactured in China, and there were bound to be a few metaphorical heart attacks.

Of course, the increased demand for goods incentivised China, like any smart supplier, to fill containers and ship them to the Western world.

However, our own lockdowns, operating on a different timescale to those in the East, made it increasingly difficult to refill said containers, and return them.

We have ‘top men’ working on it, right now

If this is giving you a mental image of the warehouse from Indiana Jones, full of highly valuable goods, sitting there gathering dust, that’s probably fair.

The reality’s not too different.

And much like the chase for gold in whimsical films of that nature, so other characters are now elbowing their way into the shipping discussion, like a poisoned dart from left field.

As other low-cost manufacturing locations enter the plot, ships and containers are being diverted to Africa and far-flung Asian destinations.

Now, I should mention, this isn’t a criticism wholeheartedly of any particular government.

Some sectors, such as the UK construction trade seemed to march on, admittedly slowly, through the many lockdowns we’ve had. Was it an oversight not to allow people employed throughout the supply chain the same affordability?

There was much muster to back the economy by those at the top. But expenditure on goods eventually slows if the same goods being purchased can’t actually reach your doorstep. Or, you can’t work, to pay for the goods in the first place.

So where European and US ports were at capacity in terms of containers in ports, a bigger issue may have been a deficiency of staff.

This meant many companies actually kept their goods in containers, rather than move them to warehouses, once again limiting supply even further.

Was this avoidable? Possibly.

But hindsight’s always a wonderful thing.

So where now?

Well, I suppose we could add some more ships to the circuit? Only, that process would take about 3 years to have a positive effect.

We could collectively attempt to impose deadlines on container movement? Like a pacemaker might impact the supply of blood to a human body.

But the idea of coercing individual governments toward a common goal sounds even more complex than performing heart surgery, without so much as a day’s medical training.

Similarly, manufacturing new containers would no sooner solve the problem at hand.

And perhaps even make it a more complex issue to solve, like giving a triple heart bypass to someone with high blood pressure.

No, this problem’s here for the foreseeable. There will be a solution I’m sure, but it’s still some way off.

So, the best way around this issue, for you and me at least, is to create strategies, tactics and executional decisions that combat it.

Accurate forecasting would be a start

One of the things I’m a huge advocate for, is the above philosophy.

It doesn’t matter what problem is affecting your business, collaborative forecasting will always pay dividends.

Whether it’s the issue we’ve discussed above, or increased red (or rosy depending on your perspective) tape from Brexit.

A good demand plan which leads to a sophisticated purchase forecast will save your business time and money. Simply, in times of little choice, the choices you and your suppliers make need to be tightly reasoned.

You need to understand which products are the most important.

Sometimes they’re the ones with the most inherent profit per unit.

On the flip side, maybe they’re loss leaders? Those which may create further sales for the business, but lose money as a single entity?

It could be products based on the volume of sales? Or simply dependency?

But in the world we now find ourselves, stocking and non-stocking decisions need to be more tactical than ever. And collaboration and communication around that topic isn’t something you should skim over lightly.

Yes, engagement with customers to ascertain demand is, and always will be, a crucial element to your business. But better forecasting means higher accuracy, which means a longevity to your success that a lot of companies are struggling to find.

Don’t let your business be one of them.

 

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Richard Evans

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