In the world of news, disasters and wars garner headlines for a while, which fuels anxiety and, as a result, increases supply chain uncertainty and freight rates. But after a certain point, once the news cycle exhausts the angles and the disruption is part of the norm, it becomes part of the background noise. Society moves on and the world of logistics provides certainty in the continuous movement of trade and the new norm. This takes time, but in the end the agnostic flow of trade does, and will, prevail.
Companies’ logistics decision-makers have faced unprecedented hairballs in the pipes of trade since COVID. These new supply chain challenges are both man-made (war and the numerous labor strifes and strikes), and natural (Mother Nature’s logistical smack down on the Panama Canal). The pipes of the supply chain are connected, and the ripple effects of these supply chain shocks are felt throughout as world logistics decision-makers try to find the easiest way to move. Just when logistics managers thought a Suez Canal diversion would be an answer to the Panama Canal, Hamas started to attack the freedom of navigation in the Red Sea. Challenges can create opportunity. Innovation in services and customer relations will separate the winners and losers. In the TEU battle, it boils down to service.
The pivoting needed to effectively manage the changing logistical infrastructure is trial and error. You saw this in real time with the ocean carriers deciding on diversions in the Red Sea. Some were more indecisive than others. The pingponging of the if-they/will-they only added to the uncertainty. Now that the Cape of Good Hope trade route is established, the planning of a longer transit has been baked into the supply chain and prices have gone down.
Trade has settled into a new rhythm and the predictability and flexibility of the logistical supply chain only reinforce the fact that the participants in trade will find a way. According to the latest data by Sea-Intelligence, the normalcy was evident in the February 2024 global schedule reliability score. It improved by 1.7 percentage points M/M to 53.3%.
“The average delay for late vessel arrivals also improved to 5.46 days, roughly the same level as pre-crisis, which means that the increase due to the crisis has reverted,” said Alan Murphy, CEO, Sea-Intelligence.
But when you review the flow of trade versus last year, the disruption is still there. We are now just going with the flow. Schedule reliability is 6.9 percentage points lower. Hapag-Lloyd, one of the earliest carriers to announce diversions, had the best reliability of 54.9%. On a month-to-month-improvement basis, Hapag-Lloyd’s schedule reliability rose by 9.7%.
The recent deadly disaster at the Port of Baltimore is the latest trade/supply chain obstacle to grab headlines and generate outrage and uncertainty. But after a solid week of news coverage coupled with the vessel diversions and new rail services moving the diverted containers, this tragedy and the aftermath of the bridge destruction have become part of the everyday noise. Now we watch to see whether the harbor reopening will happen on the timeline promised. The swiftness of the CSX/Ports America service to move the diverted containers from New York/New Jersey to Baltimore is an example. See what assets you have and what you can do to address a problem with those assets.
The lesson we have learned since COVID is the simple fact that trade takes people, and participants in trade will always find a way to keep freight moving. What needs to be highlighted is that even when the supply chain fades from the headlines, that does not mean the hard work to sustain that resiliency has disappeared.
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