It is estimated that around 90 percent of global goods are carried by sea. And despite the impact of the pandemic, global container throughput across the world’s ports reached approximately 775 million twenty-foot equivalent units (TEUs) in 2020, just a 3% drop from 2019.
Nevertheless, COVID-19 and port congestion have led to increasingly unpredictable cargo movements across shipping ports, resulting in bottlenecks – a problem that was a long time in the making.
As one of the most interconnected industries in the world, the logistics sector is highly vulnerable to macro- and micro-economic factors. Disruptions at any one node in the supply chain can trigger a tsunami across port traffic worldwide; like how the Ever Given incident at the Suez Canal halted billions of dollars a day in maritime commerce.
As the fundamental driving force behind global trade, supply chains can no longer afford to be running on excel sheets and guesstimates.
Accurate data, predictive modelling and scenario planning are all crucial factors towards building resilient supply chains amidst the challenges and disruptions brought about by a fast-evolving environment.
Troubled Waters – Major supply chain disruptions are becoming more frequent
There has always been an element of uncertainty and risk present in maritime trade. But rapid developments in the global economy, more frequent extreme weather conditions, as well as political events, all point to a growing intensity of supply chain disruptions.
In the New Normal, the McKinsey Global Institute predicts that major supply chain disruptions lasting a month or longer, may now happen every 3.7 years on average.
We are already seeing how value chain shocks are creating troubled waters globally.
Let’s take the Port of Los Angeles (LA) in Southern California for example. The port has experienced new record volumes of incoming cargo in 2021, largely due to the uptick in imports from Asia, driven by increased e-commerce activities and higher levels of consumer online spending.
This reported surge in activity at the port is backed by Portcast’s latest platform data. We observed a steady increase in port traffic at LA over the past year or so, peaking at an increase of 28.8%, as compared to a year ago.
Coupled with the limitations on workers on-site, the congestion at the Port of LA created bottlenecks across the trade gateways in the United States. The spillover also affected other ports from Oakland,California to Savannah,Georgia, as shipping companies turned to alternate paths for the purpose of business continuity.
Our latest data showed that the port traffic in Oakland saw a 12.4% increase between March and April 2021, while Savannah saw an increase of 15.3% from April to May 2021 – likely reflecting the rerouting of vessels from the Port of LA.
This higher traffic at Oakland and Savannah makes delays and hold ups inevitable, and shippers bearing the financial and environmental impact of these detours.
The industry is undergoing another crisis at the Yantian port in Shenzhen, China – one of the country’s busiest container ports. This follows the strict measures put in place to stem COVID-19 infections, after cases were found among port staff. With worsening congestion at the port, major shipping companies are changing port call schedules, aggravating the traffic at the nearby ports of Shekou, Chiwan and Nansha. The delays at the southern China ports have further exacerbated global container shortages, sending freight rates soaring to almost 10 times the normal rates.
Ripple effects don’t stop in the waters – it spreads across the chain, to truck waiting times causing traffic jams and delays in containers leaving ports. Thus, we can expect to see a surge in cargo movement once normal operations resume, further delaying shipments by weeks.
The Global Impact of Maritime Choke Points
Even prior to the Suez Canal blockage or the Yantian congestion, the global maritime supply chain was already being stretched to its limits with COVID-19. This is in part due to the rapid rebound in trade volumes after the early months of economic standstill.
The reality is, the Suez Canal and the South China Sea are just two among the eight primary and dozens of secondary maritime choke points integral to global trade, from food and agriculture to oil and energy markets.
Closer to home in Singapore, the Straits of Malacca accounts for a quarter of the world’s traded commodities and is known as a key choke point and connection between China, India and Southeast Asia.
If the Straits of Malacca closes due to disruptive hazards—which can range from extreme weather to security concerns and political decisions—the potential costs and delays that come with rerouting trade will in turn shake up secure supply and price stability in the global commodities market.
The global shipping industry has long recognised the vulnerabilities inherent in choke points.
But the pandemic and recent disruptions have spotlighted the sheer importance of supply chain visibility through rapid digitalisation to future-proof the sector for continuous change.
Role of AI to Manage Supply Chain Disruptions
It is clear that advanced technology—in the form of a data-driven approach, underpinned by AI—is crucial in dealing with a complex and increasingly volatile supply chain, giving businesses a significant edge amid today’s testing economic and environmental conditions.
Shippers can no longer rely on legacy systems and manually-driven processes, such as waiting for estimated shipment arrival time or making multiple calls to shipping agents and forwarders for delay information. By continuing with the status quo, they will only experience longer delays and greater losses as compared to competitors who focus their efforts on investing in new digital solutions.
But what exactly would these solutions entail?
At Portcast, we believe that reliable, trustworthy data – with the power of AI and machine learning – can bring end-to-end visibility to global supply chains.
Intelligent Container Visibility enables real-time vessel and container tracking of more than 95% of containers and 430 ports globally. On average, our first accurate prediction, through on-the-minute alerts, beats carriers by more than 3 days.
With better visibility of vessels or shipments, you can now mitigate risks caused by external disruptions and plan ahead to reroute shipments, make timely transport arrangements from ports and better balance cost and delivery times. Did you know that for every single container, a logistics professional spends at least 40 emails and calls to chase suppliers and hauliers for updates? Portcast enables predictive alerts, provides intuitive reasoning for delays and analytics support to plan warehouse and trucking movement. Our case studies have shown that this reduces manual follow-ups by almost 80% and improves the supply chain costs by up to 20%.
Such technology enables efficiency and also sustainability in global supply chains. With shipping responsible for almost 3% of global CO2 emissions, efficient supply chains, slow steaming possibilities, reduced congestion allows the industry to reach its sustainability goals. Portcast technology has the ability to not only provide visibility on CO2 emissions per vessel or per container, but also suggest greener routes of shipping.