After the blockade of the Suez Canal; Interest in the world of maritime transport and its organization has been renewed. For those outside the industry, the fragility of the global shipping network came as a surprise. That is why it is important to know everything about the current port congestion.
Several unprecedented global challenges have put significant pressure on the shipping industry. Ports are grappling with supply chains that are recovering after the devastating impact of the global COVID-19 pandemic. For example, there is a lack of trained personnel to handle supply chains and the sheer volume of goods moving is putting pressure on virtually all international ports.
Port congestion is a real problem and is not helped by expanding regulatory requirements. This article examines the underlying causes of congestion as one of the key challenges facing the industry. It also considers the impact on shipping companies and the freight transport sector in general. In addition, we explore the possibilities of circumventing these problems.
Causes of port congestion
The most simplistic answer is that the COVID-19 pandemic has disrupted demand patterns. First, there was a sharp drop in demand and then it rebounded beyond expectations as demand shifted towards e-commerce. Shipping companies also had to transport medical and protective equipment.
However, there are other complex underlying causes of congestion. For example, there has been an increase in the size (and number) of vessels that normally anchor in most ports and the volume of goods that pass through those ports. Freightwaves reports a strong rebound in container ships landing in Long Beach and Los Angeles.
These increases are real, even when compared to those that occurred during the 2015 labor riots. Therefore, the kinds of ships that we are seeing in ports are not only larger than before; but also carrying much more load. This creates a significant workload for those involved in the verification and processing procedures.
Recent global crises have created critical staff shortages. Although there has been some improvement in recent weeks, the big picture is an industry that lacks qualified and experienced staff. Some have been swept up in the pandemic, while others fear returning after being suspended. In that sense, the increase in congestion is not surprising.
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In addition, there has been political pressure that has negatively impacted the congestion statistics. The Maritime Executive has reported on post-Brexit trade patterns that have caused a slowdown in port processing. There are new processing requirements and protocols related to ending free movement agreements above. Other factors that contribute to congestion include inclement weather, low persecution and geopolitical pressures, etc.
Impacts of congestion
Congestion has impacts and consequences. One of the most affected dynamics is performance. Processing and publication times have doubled or tripled. Shippers and their freight forwarders are struggling to coordinate and manage supply chain relationships in such a climate. Therefore, extended logistics transfers are not helping essential Importers of Record (IOR)..
Another impact is related to the greater complexity of operating in the shipping industry. After delays, additional processes and documents arise. Sometimes the process needs to be restarted because there has been a significant delay in completing the first process. Freight forwarders have to expend additional resources to deal with unnecessary and often redundant paperwork.
All of this leads to increased financial costs, notable examples being the increase in delays and arrests. Contractually defined free periods are routinely lost. Internal stay and external detention mean that the costs of doing business are increasing. Over time, these costs reduce profit margins on shipping and the ROI of the cargo being transported.
Possible problems with the port
Unless congestion is addressed, potential port problems will become a reality. Shipping will become less and less efficient, thus negatively impacting customer relationships. Only those who take advantage of their agility and knowledge will be able to overcome these problems. Digital solutions provide some relief, although some companies have yet to fully embrace the power of the digital age.
The legacy processes that dominated the shipping industry in the days before COVID-19 are no longer suitable for the task. They are only good enough for when things are going well. Otherwise, they are not responsive or reliable enough to deal with the kind of volume fluctuations the industry is now facing.
One of the solutions that companies could consider is the use of cloud-based systems to move towards data-driven transportation. Various software solutions are entering the market and companies should try to take advantage of the fundamental benefits they offer. Some of the areas that could benefit from these technological advances include:
1. Cost and Fee Assessment: Technology makes it easy to assess detention and stay fees. Some packages automatically calculate processing times, charges, and fees. They can also provide real-time data that is critical for decision making. Transparency will bring rationality to port processes. For example, freight forwarders will be able to select the best ports for specific carriers when necessary.
2. Track and trace: At a time of increasing volumes and complexity, shippers need to know what is happening to their cargo. Technology can provide them with real-time information so they can respond to any problem within the supply chain. For example, Magaya’s container tracking solution currently supports up to 70 global carriers.
3. Logistical visibility: One of the keys to success in managing a supply chain is logistics visibility and technology is a key aspect to consider. Customers have a keen interest in knowing when their products will arrive and being able to provide them with accurate and timely information will greatly improve customer relationships. The huge volumes currently being handled mean that the traditional phone call and email model will not work. Shippers are turning to innovative solutions like LiveTrack to link customers to the supply chain in real time. This has the added benefit of reducing staff workload, a key point during staff shortages.
The shipping industry is dealing with congestion due to several factors including increased shipments, cargo shifts, geopolitical pressures, and post-COVID-19 demand surges. Not managing congestion increases the cost of shipping and reduces the quality of customer experiences. Therefore, companies should consider using modern technology to offset the practical demands of a complex and evolving shipping industry.