Global Supply Chain and Logistics Focus: Our Weekly Feature Article on Topics Related to the Global Supply Chain and related Logistics News and Issues  
 
 
  - April 16, 2008 -  

Global Supply Chain: For Want of a Box, the Export Order was Lost

 
 

Here’s a Change – Not Enough Containers to Meet Surging US Export Demand; Complete Lack of Containers in Midwest, One Analyst Says

 
 

 

SCDigest Editorial Staff

SCDigest Says:
The combined result – many manufacturers are scrambling to find containers to move products they’ve already sold, a total reversal of the conditions in recent years, when outbound containers were plentiful.

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With dramatically changing economic conditions and a sharp fall in the US dollar, imports into the US have dropped dramatically, while exports have surged. That has led to a supply chain bottleneck no one was likely to have predicted even a short while ago – a shortage of shipping containers for US manufacturers to fill with product for export.

Some 50 years ago, Malcom McLean revolutionized global trade with the introduction of the ocean shipping container for his Sea-Land ocean carrier company. The ocean container, lauded in the popular book “The Box that Changed the World” a few years ago, not only enabled more efficient transport and protection for goods moving across the globe, it enabled automated handling that dramatically reduced overall logistics costs and greatly increased the speed of loading and unloading.

Now, the world economy depends on the container to make its economies go – and right now a shortage of containers is limiting some US exports.

A slowing economy and falling value of the dollar has significantly slowed the growth of imports into the US – and with them tens of thousands of soon to be emptied containers, many of which traveled actually back to Asia empty. At the same time, the falling dollar has made US goods cheaper worldwide and led to a steep rise in imports, which are growing, now for the first time in memory, faster than imports.

Finally, many US exporters are in the Midwest or other areas far from the coastal ports where most containers are unloaded in import warehouses – and it’s expensive to move them empty to where they are needed.

The combined result – many manufacturers are scrambling to find containers to move products they’ve already sold, a total reversal of the conditions in recent years, when outbound containers were plentiful.

(Global Supply Chain and Logistics Article - Continued Below)

 
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"There are some places, particularly in the Midwest, where there's a complete lack of containers," the Wall Street Journal quotes Philip Damas, the head of container research at Drewry Shipping Consultants, as saying.

There apparently is also a shortage of chassis, the wheeled frames upon which containers ride when transported by truck.

Adding more fuel to the fire, some shipping lines, including industry giant Maersk, have shifted container capacity away from the US just as exports are surging.

“The focus on global inbound logistics has been so great, we’ve really paid relatively little attention to the outbound logistics issue in Western countries,” SCDigest editor Dan Gilmore notes. “I think it’s going to need a little more attention from now on.”

The container shortage is causing real financial problems. In some cases, companies are forced to pay for more expensive air freight because they can’t line up containers and ocean shipping in time.

In other cases, manufacturers may lose “opportunistic” global orders for which they lack planning time to ensure adequate container support – they can’t get the logistics right to meet demands for immediate shipment.

Refrigerated containers are said to be in especially short supply.

The bottom line is that even as US export opportunities rise, significant sales might be lost due to the inability to ship in a timely manner. Exporters must also put much more focus on ensuring container availability, and work more closely with partners such as Freight Forwarders to improve planning and, as a result, container and shipping line availability.

Is your company struggling with finding outbound containers? What strategies can work to minimize the problem? Let us know your thoughts at the Feedback button below.

 
 
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