Posted by Senior Management on 06.03.21
By Dennis Ehrenberger
Transportation interruptions in ocean freight are currently a critical issue. Ports on the West Coast are layered with ships attempting to drop and pick up freight. There is a shortage of ocean containers as many aren’t being returned to their original shippers, and as a result companies are bidding to place their freight in whatever containers are available. Businesses are being forced to pay up to four times the norm to use shipping containers and get them on ships to be transported, especially in the Asian Pacific. Some container ships are being returned to China half-full or empty, which greatly decreases shipping efficiency. In some instances, trailers and containers have been over packed or packed haphazardly. Some have fallen off ships anchored out in the bay. Due to these issues with ocean freight, product is struggling to find its way from China to the United States.
One way companies are handling shipping delays is by increasing inventories in anticipation of future orders. Sedlak is currently working with Client Y to analyze how big their new facility needs to be to store product through 2026. This analysis is directly impacted by the shipping delays of the present and future, meaning that more space than usual may be designated for inventory.
A different client, Client Z, is facing tougher challenges because a large part of their business is made to order and requires tight timelines to coordinate their installation with construction schedules. Increased delivery timelines have forced Client Z to manage customer expectations differently. For example, a project that typically would take eight weeks may take 12 now, and it’s important to keep customers informed of these changes.
Delays in ocean freight will be the norm for the foreseeable future. As a result, many supply chains are considering changes in network design, facility size and location in order to alleviate some of these challenges. Many clients are looking at different ways of doing business, such as opening additional distribution centers closer to their customers, removing the international shipping variable. Domestic sourcing would remove one weakness in shipping chains. Other clients are considering the building of smaller sites at multiple locations across the country, specifically where their customers live, and possibly closer to ports with less traffic and easier access. Client Z is taking action is by engaging Sedlak to conduct a network design project. Sedlak will determine where the company’s distribution centers and manufacturing facilities should be located based on where they are sourcing their supply and where it is coming into the country.
Companies who find themselves struggling with transportation network issues can get the help they need from a consulting firm. Consultants can use their contacts in the business to understand the experiences different companies are having, and they can relay this data to clients who can then benchmark where they are in the marketplace. For example, Client Z was able to benchmark their ocean freight pricing, and they learned that they were paying above market pricing. Getting the right industry data is crucial for companies who are trying to plan their next steps.
Does your supply chain need help from a consulting firm? Sedlak is here to help. Contact Dennis Ehrenberger at email@example.com for more information.