Chaotic Shipping Industry Chokes Global Economy
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By: Krypt Team - October 22nd, 2021

Authored by: Vijendra Kargudri

Shipping Industry – a major contributor to the global economy

A statement by Lars Jensen, CEO of Vespucci Maritime, who has spent 2 decades studying the industry sums up all about the current situation the shipping industry is in! He stated, “The shipping industry is in a state of chaos which never has been so since it was invented.”

Back in 1956, a maiden voyage of the first container ship set sail from Newark, N.J. For many, it will be hard to comprehend just how big a deal this innovation was and is even to this day! It was merely a big ship carrying metal containers. But these containers enabled ships to carry voluminous cargo. And, it enabled the shippers to drastically cut costs, time to load, unload, and transport their shipment. Global economists credit these containers for increasing the efficiency of shipping and also for bringing the modern global economy together more than anything else — even more than all free-trade agreements put together!

Global economists are worried that the shipping industry that transports these metal containers is in chaos & clogged. This has posed great difficulties for global stores to restock their shelves, manufacturers, carmakers, and builders to get vital parts they need, and farmers to export their produce. Analysts consider this to be an important reason for the surge in consumer prices globally.

What caused this chaos & clogging?

As the pandemic hit the scene, global lockdown happened, and global trade just receded. The decline was obvious in the first half of 2020, due to which shipping companies canceled their trips and docked their ships and containers wherever they were. The lockdown also necessitated the international borders to close, drop in travel, and global businesses to go digital. Unable to travel, many consumers who got to save money, started buying things online — stuff that largely comes from China on container ships. Availability of vaccines, a surge in vaccination of global citizens, and borders opening up, the shipping industry has witnessed a sudden increase in volume due to the rise in demand of global consumers. This has been an outcome of a shift in the consumers’ spending habits.

There are a couple of reasons that caused the chaos –

At first, it was the containers that were the problem. When the buying spree saw a surge, the Chinese exporters struggled to back enough empty containers, many of which were still stranded in the U.S. due to canceled trips at the beginning of the pandemic. Making things worse was the processing of containers taking longer due to all the disruptions & inefficiencies ensued by the pandemic. Containers have been stacking up at dockyards, while the trains and trucks have labored to get them out ASAP.

The pandemic has caused longstanding problems with international supply chains, not just at the ports but also in the warehouses, distribution centers, railways, and all places that ought to run smoothly. Globally, dockworkers have been working through the pandemic to manage the increased cargo volume. Quite a few workers lost their lives to the pandemic. In spite of the challenges, they all continue to work hard month after month to clear the cargo as quickly as the supply chain allows to supply ravenous consumers and businesses with the stuff they want. The resulting traffic jams at international ports will take longer to unload goods, extending the latency in time for ships to get back across the continents and reload. Such congestions are creating massive delays on both ends of the shipping supply chain, piling a large number of containers & ships, causing backlogs, rotting of perishable goods, manufacturers unable to get the raw materials, and shortages.

Then, in March 2021, the Ever Given, one of the largest container ships in the world, got lodged in the Suez Canal. It caused a colossal global shortage of ships and containers by stranding even more of them out at sea on either side of it.

There has been a COVID-19 outbreak at the Yantian International Container Terminal in China, one of the busiest ports in the world. Their government immediately implemented strict measures to control the further outbreak, resulting in more than 40 container ships having to anchor and wait. Experts say, “in terms of the amount of cargo, what’s progressing in South China right now is a larger disruption than the Suez canal incident.” As if all this has not been enough, in other parts, there has been a rise in fuel price causing truckers to go on strike, while in other there is no stock of fuel in the fuel stations and somewhere else, there is a shortage of truck drivers.

All of these unseen reasons have added to the woes of the shipping industry and suddenly choked the economy of every region depending on the delivery.

How can Krypt help you?

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Our team of supply chain experts can help you with a rapid & cost-effective integration/implementation of SAP TM, LBN, APO, IBP, and EWM. And, if you wish to know more, please request a free demo or contact us.

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