Drought, Wars, and Pirates! Volatility in the supply chain means trouble for logistics teams

Nature and geopolitics are creating havoc for companies’ logistics operations everywhere. What should company leaders be doing right now?

Supply chain disruption didn’t stop with the end of COVID lockdowns. Things, unfortunately, never really got back to ‘normal’ thanks to the steady influence of natural and geopolitical circumstances ever since. You are not alone if you feel like supply chains are stuck in a bad cycle that we can’t break free of.

At this point, it’s fair to say this is the new normal, and the trend will continue. Some experts recently put geopolitical risk at its highest point in over a year, since the War in Ukraine started and the pandemic.

While all this is going on, many companies that operate a global supply chain are seeing some important contrasts. The difficulty is being felt in uneven ways. At the moment, a calm (yet troubled) low-rate domestic truckload market in the U.S. for shippers is not necessarily reflective of what is happening globally.

Regardless of what level of pain your company’s logistics network is feeling, now is the time to create a supply chain built with more resiliency and flexibility to withstand what’s happening and what’s to come.

What Is Going on That’s Impacting Supply Chains So Much?

There is a perfect storm of issues in the marketplace working for and against companies and their supply chains.

For one, the War in Ukraine has been ongoing for over two years. Aside from the tragedy that is war, its impact has been to increase fuel costs and disrupt shipping within and from Europe.

Adding to that, problems in the Middle East, including Houthi attacks and other issues with piracy, have changed shipping in the important Red Sea. To avoid the area, some ships are being rerouted around Africa to get to Europe from Asia to avoid the delays and potential attacks at an additional cost and extended transit time.

By extension, the delays and costs of these problems are now impacting U.S. supply chains, too.

Closer to home, the issues of drought, El Nino patterns, and climate change are represented by extremely low water levels in the Panama Canal, which has led to restrictions on the number and types of ships that are able to use the canal. Like the Red Sea, this has created additional costs for companies in the form of extra fees or the need to sail around South America to avoid the canal.

Another supply chain challenge U.S. companies are facing is the remnants of higher inventory levels (a holdover from the pandemic) and slow consumer demand which have kept domestic shipping rates low. This is a good thing in the short term, but it’s also having the effect of slowly removing capacity from the marketplace, which will only serve to increase rates in the long term.

What Are the Impacts in Real Terms?

Companies in the U.S. are feeling the cost impact of what’s happening in quantifiable ways.

When it comes to international shipping, global container rates are up. However, they’ve fallen from a very recent post-pandemic peak, which saw a nearly three times increase from just a few months before that. It’s also notable that the aforementioned low domestic shipping rates have likely bottomed and are now increasing according to Loadsmart market data.

Less quantifiable but no less real are the impacts on companies when it comes to planning and supply chain execution. International issues are forcing some companies to work with shorter lead times due to slower deliveries. Businesses that face such volatility and uncertainty may also find it hard to plan for their labor needs while incurring higher costs due to having to expedite shipments. All this, at a time when operating budgets in general have tightened significantly for many companies.

How Managed Transportation Can Help

Tackling the local challenges presented by global disruptions can be helped with a more holistic view of a company’s transportation needs.

When disruptions are focused on specific geographies, for example, finding alternative routing options can become the priority. The same applies to companies looking to handle the peaks and valleys of demand and shipping activity in general.

Managed transportation is a solution many companies leverage to overcome supply disruptions like the ones the market is experiencing right now. Quality-managed transportation partners provide specialized market knowledge and logistics technology, along with accountability for performance that most companies cannot create on their own.

Managed transportation is a fast, low risk way to bridge experience and technology gaps companies have in their supply chain in tactical ways. This can include adding talent and technology like ShipperGuide TMS that improves how their supply chain operates while letting the company and its people focus on what they’re good at.

Most importantly, a managed transportation provider enables companies to future-proof their supply chain.

Are you concerned about how global supply chain disruption is impacting your company? Contact Loadsmart to learn how our Managed Transportation solution can help you create a more resilient and future-ready logistics operation.