Updates from freight forwarders about the global supply chain continue to paint a bleak picture. We have known for a while now that the situation was unlikely to improve any time this year, but recent developments bring forth an even greater cause for concern than in the past. Ocean carriers have begun limiting the amount of containers that can move inland by rail by about 50-60% of current levels. This move will have a huge effect on other aspects of logistics like container availability, pricing, and transit times, to name a few.
Ocean carriers’ reasoning behind this move is that they want their containers back ASAP in order to send them back to Asia to be reloaded. How do rail shipments factor in? When a container is shipped inland by rail, the process of it being moved across the country and then back to LAX in order to be sent back to Asia can take at least 30 days, sometimes over 100 days. This transit time has been deemed too long by carriers, as each day the container is not returning to Asia is a day that costs the carrier money.
Importers will now have to wait even longer for booking to an inland point or rely on drayage to a local warehouse, transload the container and have it shipped to their location via ground freight. There are multiple issues that arise with this. One being is that warehouses and drayage carriers were already operating at full capacity before this clamp down on rail transportation, so congestion on that front will get even worse. As a result, pricing for the process of drayage, transloading, and then trucking it will skyrocket. It’s a textbook case of supply and demand. Demand has spiked for a supply that was already low, leading to a situation where freight forwarders and importers will essentially be bidding for service. Whoever has the highest bid wins the service of having their goods shipped to their location via ground freight.
Unfortunately, conditions are not improving, but rather continue to get worse as time goes by. People may look to importing through the East Coast or Gulf, but those lanes are already congested as well. Many freight forwarders believe that the situation might become more predictable by late 2022, but a return to normal conditions is still years away. We will continue to update our readers on any new developments in the global supply chain.