The logistics landscape has plunged into chaos beyond our initial predictions post-GRI (General Rate Increase). In our previous blog we explained what is GRI and how it might impact the shipping industry. This blog aims to provide a detailed overview of the unfolding situation, identifying the different stakeholders affected and outlining the issues each group faces.
Stakeholders:
Exporters
Shipping Lines
Manufacturers
Importers
Exporters
Issues Faced:
Port Congestion and Delays: Severe congestion at ports is causing massive delays in vehicle gating and clearance processes. The situation is exacerbated by the monsoon rains, making operations at exim yards extremely challenging.
Vessel Schedule Disruptions: Vessel schedules are highly erratic, with significant delays in berthing at Ports of Loading (POL). In some cases, vessels are skipping POLs entirely, causing cargo to be rolled over to subsequent vessels.
Container Availability: There is a drastic reduction in container availability, adding another layer of complexity to the shipping process.
Premature Gate Closures: Containers are sometimes not loaded onto vessels due to premature gate closures, with no prior notification to exporters. This results in extended waiting times at exim yards and additional costs due to rent beyond the free period (usually five days). Exporters bear the cost despite the delays being caused by shipping lines.
Operational Costs: Despite delays caused by shipping lines, exporters end up paying for operational delays, leading to increased costs.
Manufacturing Impact: The delay in container movement has significantly slowed down manufacturing processes. Sortex plants and ETO treatment centers are operating at reduced capacity due to the lack of container movement.
Exporters are paying twice or thrice the usual amount for the same routes but cannot commit to timelines for their customers. Booking cancellations occur without notice, and there's uncertainty in container allotments. Even after 'gate in,' vessels might skip the POL, leading to additional storage charges and a slowdown in order cycles, ultimately hitting revenues.
Shipping Lines
Issues Faced:
Congestion Management: Shipping lines are struggling to manage severe port congestion, leading to delays in vessel schedules and berthing at POLs.
Operational Delays: The delays caused by port congestion and adverse weather conditions are impacting the overall operational efficiency of shipping lines.
Communication Challenges: There is a gap in communication with exporters, leading to issues like premature gate closures and lack of prior notification for booking cancellations.
Manufacturers
Issues Faced:
Slowed Production: The delay in container movement has led to a significant slowdown in manufacturing processes. Sortex plants and ETO treatment centres are operating at reduced capacity.
Inventory Management: Manufacturers are struggling to manage their inventory due to the unpredictable nature of container availability and vessel schedules.
Importers
Issues Faced:
Uncertain Delivery Schedules: Importers are facing uncertainty in delivery schedules due to delays in vessel berthing and container movement.
Increased Costs: The additional costs incurred by exporters and manufacturers are often passed on to importers, leading to increased operational expenses.
How the Situation is Unfolding:
Port Congestion: There's a massive line for vehicle gating, causing clearance delays. The monsoon rains are not helping, further complicating the situation at exim yards.
Vessel Schedule Disruptions: All major ports are facing congestion, resulting in:
Delayed vessel berthing at POL.
Sometimes vessels skip POL altogether, rolling over cargo to the next vessel.
Reduced container availability.
Premature gate closures leading to only pre-set cargo being loaded without prior notification to exporters.
Extended waiting times at exim yards, resulting in additional costs due to rent beyond the free period.
Operational Costs: Exporters are bearing the cost for delays caused by shipping lines.
Manufacturing Impact: Sortex plants and ETO treatment centres are facing reduced operations due to container movement issues.
Conclusion:
The current logistical chaos post-GRI is affecting all stakeholders in the supply chain—exporters, shipping lines, manufacturers, and importers. Port congestion, vessel schedule disruptions, and container availability issues are leading to increased operational costs, unpredictable delivery schedules, and slowed manufacturing processes. I wish we had a solution to the ongoing problem, but it is mostly a wait and watch scenario. The general consensus is that the situation should resolve by the end of August but we are skeptical.
The primary precaution one can take is to plan extensively ahead, take into account the expected delays and plan your inventory accordingly. However, there are 3 must follow practices to avoid the situation as much as possible: 1. Look at the historical data. Yes, some ports are prone to congestion and if you look at the historical data of your POL/POD, you might figure out the need to go to quicker alternatives.
2. Always select the direct routes whenever possible. Avoid transhipments as you might be prone to further delays at the connecting ports.
3. Always choose the reputed carriers. This is a no brainer, but established shipping lines do handle the delays and communications professionally, which not only keeps you in the loop during the process but also gives you a peace of mind regarding the cargo safety.
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