Port Congestion and the Need for Supply Chain Visibility

When the global supply chains were recovering from the impending effects of the Suez Canal Blockage, the congestion at China’s Yantian Port sent the industry into a complete frenzy. However, the culprit this time wasn’t a dislodged vessel but the COVID-19 virus that sent the major Chinese export hub into a partial closure for over a month. The port’s throughput of 13.3 million TEUs last year dropped significantly, leaving it crippled. Approximately 20% of the Chinese exports to the US and globally, more than 10% of Chinese exports rely on the Yantian port. Industry experts considered the port congestion and delays worse than that created by the Suez Canal blockage that left nearly 600 vessels stranded for six days and cost $9.6 billion to the global economy.

Reduced labor and port productivity negatively impacted the trans-Pacific on-time vessel performance that was at 22.2 percent to the US West Coast in April. After a couple of weeks of distress at the port, project44, the leading supply chain visibility platform, reported on July 1 that the rolling seven-day average dwell time at Yantian was down to 12.9 days for exports and 4.2 days for imports, compared to June’s peak of 25.4 days.

The Yantian Port Crisis

Towards mid-May, the Delta variant of the COVID-19 virus wreaked havoc in the Guangdong Province in China, which caused severe delays in the otherwise highly efficient South China ports of Yantian, Nansha, and Shekou. On May 21, the Yantian port authorities imposed stringent disinfection and quarantine protocol as they confirmed port staff being infected by the COVID-19 virus.

Yantian Port congestion
Photo Source: Martin Chan

By then, approximately 40 container ships were waiting anchored outside the terminal. As congestion started building up, many vessels skipped port calls to Yantian to ease the load at the port while others started rerouting shipments. The port started operating at a considerably lower capacity of 30% in the subsequent days causing further berthing delays and intense congestion. The logjam started clearing off at the beginning of July when yard density was down to 65% and productivity touched 85%. However, experts predict that the cascading delays of the disruption could impact the upcoming peak season.

The safety and control measures led to transport and logistics delays across the region. Traffic jams caused a shortage of trucking capacity, delayed container pickups, haulage, storage, etc. that quickly translated to piling additional costs. Towards late June, major carriers like ONE and CMA CGM implemented reefer surcharges due to the congestion and non-availability of reefer plugs to as much as $1250 per reefer container.

The Impact of Unprecedented Disruptions in Global Supply Chains

Since the onset of the pandemic in 2020, maritime trade has been immensely affected. Global container shipping rates have soared to record highs. Incidents like the Suez Canal blockage further worsened the situation with unprecedented delays, rerouting vessels, and shortage of equipment and capacity across shipping lines. The unprecedented demand for consumer goods and supply chain disruptions had trickling effects leaving supply chain networks strained for longer durations. In May 2021 alone, imports from China in the United States were worth 38732.06 USD Million.

With supply constraints and soaring demand for Chinese goods, freight rates touched record highs. At the beginning of the congestion in June, Asia-US West Coast prices grew 2% to $5,494/FEU. This rate was 236% higher compared to the same time last year. Asia-US East Coast costs also climbed 2% to $7,479/FEU and were 190% higher compared to valuations for the same period the previous year. The rising freight rates remain a cause of concern in the shipping industry. According to the Drewry World Container Index, the latest spot rates on 22nd July were record high, with Shanghai to Los Angeles at $9,953/ FEU while Rotterdam stood at $13,066/FEU and New York at $11,872/FEU. The freight rates are expected to rise in August while shippers strenuously look for some respite.

Navigating the Ocean Visibility Imperative

Predictive ocean freight visibility is a critical element of a shippers’ ability to meet the rising demands of the current market scenario. While shippers struggle with delivery delays, lead time variances, and the added burdens of detention and demurrage, incorporating ocean visibility capabilities can significantly help mitigate crippling supply chain risks from unforeseen events. Advanced visibility equips a supply chain with predictive insights across the transportation network. It further automates the full shipment lifecycle and leverages high-fidelity data and analytics.

The projec44 white paper on How to Evaluate Transportation Visibility Platforms mentions that the correct visibility solutions can help businesses realize a 30-40% decrease in manual, track-and-trace activities and a 10-30% increase in labor efficiency in warehouses.

Novigo as a global implementation partner for SAP Digital Supply Chain Solutions, has partnered with visibility leader project44 to widen the adoption of ocean visibility solutions among SAP clientele. project44’s strategic partnership with SAP allows its solutions to be positioned adjacent to core systems such as SAP TransportationManagement, and SAP Logistics Business Network.

Additionally, project44’s recent acquisition of ClearMetal and Ocean Insights have further augmented their ocean visibility solutions with innovative capabilities of advanced AI, Machine Learning, and Data Science.

With the integration with SAP Logistics Business Network, SAP LBN receives critical information related to milestones and geolocation data with dynamic ETA predictions from project44. This helps track business processes and shipments in transit, including order items, deliveries, and multi-modal shipments. The data thus provided is enriched with real-time insights and predictive time of arrival that keeps stakeholders updated on progress and understand the impact of delays under disruptive circumstances.

With the current ocean freight disruptions, such capabilities have successfully allowed supply chain leaders to assess the level of impact of the congestions or delays by answering some very critical questions related to shipment visibility.

Here’s a link to our webinar with SAP and project44, where we tried to understand the dynamics of the supply chain disruptions at hand and what can be done to mitigate risks.

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Novigo and Supply Chain Visibility solutions

As a global implementation partner, Novigo is the go-to affiliate for most SAP TM users to help perform the connectivity of both systems. Novigo helps shippers enhance customer relationship management and planning capabilities by leveraging SAP’s digital supply chain solutions and project44’s predictive analytics on in-transit inventory. Knowing accurate ETAs thus helps reduce hefty penalties on detention and demurrage costs. Enhanced visibility can enable a 30-50% decrease in late arrival penalties and a 10-20% decrease in demurrage and detention costs.

With such predictive intelligence, supply chain leaders can reduce lead time variability, better manage supply chain flows, evaluate the inventory distribution, and reroute shipments to lesser congested ports in times of need.

To further explore how supply chain visibility can enhance your business, please reach out for a complimentary consultation session with a Novigo expert. We can also help you build a business case starting with a discovery workshop, ROI analysis, and solution demo to fulfill your digital supply chain transformation needs.

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