“The interruption of Chinese manufacturing at the pandemic’s outset toppled the first of several dominoes leading to today’s global supply chain pileup. While Chinese factories quickly returned to normal operations, an unexpected increase in American demand for goods during the work-from-home era discombobulated traditional trade patterns…As a result, ocean-spanning supply chains, the distinguishing characteristic of the age of globalization, are failing at multiple points.” Washington Post 7/27/21
Daunting words published in an article in the Washington Post earlier this summer, describing the current state of the global trade. In short, the global supply chain is a total mess mostly due to the ongoing COVID-19 Pandemic that has now lasted nearly two years. Many overseas goods are now in short supply and orders are slow to reach the customers and businesses that need them. There have been unprecedented delays as the pandemic has rippled through every link of the modern system of manufacturing and moving goods across the globe. Container shortages, too few cargo vessels, not enough space at the ports, labor shortages and too few trucks and truckdrivers rumbling down American highways are just some of the obstacles causing huge backups and empty shelves. Along with delays there are cost increases at every level making many items more and more costly by the day.
This should not be news to anyone buying items overseas right now nor for anyone waiting for an overseas order to arrive. If you are working with honest suppliers, the news concerning overseas order timing at this moment can best be categorized as “disappointing.” In this blog we will provide a frank assessment of some of the causes of this evolving situation and some tips on how to prevent this historical crunch from disrupting your business and your plans for the future. Many suppliers avoid talking about this subject, but we think you deserve the truth. As always, we are committed to helping you get the products your business needs in order to STAND OUT & SELL MORE even in the toughest of times.
First of all, let’s look at the current situation…
“Forty-four freight ships are stuck awaiting entry into California’s two largest ports, the highest number recorded since the beginning of the COVID-19 pandemic, the Marine Exchange of Southern California reported on Saturday. Port of Los Angeles data indicated that the ships’ average wait time had increased to 7.6 days. California ports in Los Angeles and Long Beach account for about one-third of US imports.” Entrepreneur 8/31/21
Yep, right here in the U.S., our ports are jammed and airfreight terminals are packed. Backlogs and delays are at historical highs. There’s not enough space at U.S. ports and associated terminals and labor is in short supply. Social distancing has meant fewer people could work in the same space and infection outbreaks caused many critical workers to be quarantined or miss work while being treated for sometimes critical illness.
“In the wake of the coronavirus pandemic, shortages of container ships and logjams at ports around the world combined with high consumer demand for material goods have caused freight rates to skyrocket to record levels.” Reuters 8/2/2021
This global logjam was also caused by a backlog that formed on the other side of the ocean at the point of origin in ports in China and other parts of Asia that have been shutdown in an on again/off again basis through much of this year.
Supply headaches stretching from Asian factory towns to the American Midwest are intensifying as the economic recovery tries to outrun the highly infectious delta variant. Aftershocks from earlier limits on a major Chinese port following a rash of covid-19 cases are expected later this month to worsen backlogs at U.S. West Coast facilities.” Washington Post 7/27/21
Sometimes the shutdowns are at the factory level and other times they are at some of the world’s busiest ports such as the case when the world’s busiest port near Shanghai was closed in mid August:
“China has partly shuttered the world’s third-busiest port after a single worker tested positive for COVID-19 Wednesday. The Meidong Terminal that closed processes 25% of the cargo that passes through the Ningbo-Zhoushan port. Fortune 8/13/2021
There are even cases when the delays have been caused by outbreaks on the individual cargo ships themselves:
“To give you a real-life example of the kinds of challenges we’re seeing, one of our dedicated charters was recently denied entry into China because a crew member tested positive for COVID, forcing the vessel to return to Indonesia and change the entire crew before continuing,” Michael Witynski, Dollar Tree’s CEO, said on a Thursday earnings call. “Overall, the voyage was delayed by two months.” Entrepreneur 8/31/21
According to the same article above from Entrepreneur, a freight forwarder in San Francisco said in a recent transportation webinar that “the transit times from Shanghai to Chicago had more than doubled to 73 days from 35 days.”
The effects of these delays have not only cost companies time, but it have also increased the cost of international freight and the landed cost of goods from overseas.
“Port and shipping delays are driving the price tags for Chinese goods even higher in foreign markets. The cost of shipping a 40-foot cargo container across the Pacific has ballooned from the usual $4,000 to $5,000 to a record $18,000 or more.” New York Times 7/13/21
There has been strained access to raw materials and components as well, further driving up overall costs of foreign goods. And the exchange rate between the currencies of the U.S. and China has also caused further cost increases.
“Chinese manufacturers face escalating costs these days because prices have increased worldwide over the past year for commodities like iron ore and copper and for industrial materials like steel.
China’s currency, the renminbi, has also strengthened against the dollar. So Chinese producers need to charge more dollars to pay the same wages and other costs denominated in renminbi.” New York Times 7/13/21
All of this adds up to a situation where whatever it is that you are ordering from overseas, whether it be labels, bottle caps, trucker hats, or illuminated signs; you are facing a situation where it is going to take longer to get what you want and chances are you are going to pay quite a bit more than you have in the past.
At this point I’m sure your saying to yourself “thanks for the bad news, AZ! What can I do about it?” Well, first, knowledge is power and knowing the challenges you face is better than being blindsided. Second, there are some strategies you can use to try to minimize the impact. I will list a couple ideas below.
Tips on how to
navigate the current crunch in the Global Supply Chain:
1. Make sure you really understand what your need is. Don’t focus on a product type or specific item. Instead, make sure you have a good understanding of what you want to accomplish. This can help you consider alternatives that might accomplish the same goal, but with items that can arrive quicker and cost less.
For example, a domestic made neon or light panel sign can be produced and shipped in as little as 4-6 weeks and could be a good substitute or stand in while waiting on an overseas faux neon sign that could take 4 times that long.
2. Make sure you ask all vendors the source of any item you want to buy. Ask about whether there are options that can be produced domestically or possibly from another point of origin. Ask about there their recent track record on getting similar items and what that timeline looks like. And above all, know that if someone is telling you a timeline that sounds too good to be true, it is and that company is feeding you BS in order to win your business.
3. Be sure to plan much farther ahead than you have in the past. If you intend to have a new item designed, prototyped, produced and delivered you need give yourself about 18-20 weeks if that item is coming from overseas.
a. 2 weeks to get initial designs, a few rounds of revisions to perfect your item and make sure it has been cost engineered to provided competitive quotes
b. 2-3 days to confirm quantities, shipping destinations or drop ship lists, and generate a PO.
c. 14-16 weeks for production, ocean transit, port/distribution center time
d. 3-7 days of domestic travel time to reach the final destination.
e. Please note that these times reflect what is happening now, mid September of 2021. Six months ago this timeline was shorter by as much as 5 weeks and in 2019 it was probably 8 weeks shorter. The current trend is for it to get longer and that is without considering the annual delays created by Chinese New Year usually in January and February of each year.
4. If you are reordering items that your regularly stock, you need to account for the increase in production time, and up your inventory level that triggers a reorder so you don’t run out.
5. Consider drop shipping your items straight to your distributors from the distribution center near the port. This will save weeks in transit time as opposed to bringing your items inhouse and then sending from there to distributors or other final destinations. Shipping the items just one time will also save you money on freight costs.
6. Finally, if you are considering buying an item that you know you need then buy it now, not later. Inflationary pressure is not expected to ease any time soon and we have seen the cost of many items increase with each passing week, sometimes increasing by 10% in just a matter of a month or two.
“We’re telling our customers, ‘September is the new December,’ ” said Beth Wagner. “If you see something that’s important to you, buy it now.” Washington Post 9/1/21
We hope this blog has been illuminating and will help you better understand the situation you face when ordering overseas goods whether from us or another provider. Antigo Zeon is dedicated to providing our clients not only with high quality, custom Point of Sale items, but also with honest, transparent and useful information, even when it is not all sunshine and roses. You deserve the truth.
“Whatever the new normal is, it will happen a lot later than people assume,” Marc Bitzer, chief executive of Whirlpool, told analysts Thursday. “Everybody hopes for [the] new normal to be next quarter. It’s not going to be.” Washington Post 7/27/21
Darin McGregor is the VP of Sales and Marketing for Antigo Zeon. He joined the company after working in craft beer for more than 12 years following a successful career in journalism.