Flying Blind

Back in September and October, suppliers in China and many other countries dealt with electricity shortages, aluminum, magnesium, and silica shortages, in addition to ongoing container shortages.

Fast forward to December; we are seeing that. 

• Containers are becoming more available than in the last 90 days, although they remain historically high (Drewry Index is still high around $9500 – 5x the 10-year average!
• Labor is more available in most factories than it has been in almost a year!
• Aluminum material availability is normalized now with the supply of bauxite and magnesium 
• Electricity shortages in China have all been curbed by the government, allowing up to 20% hikes in prices to consumers and businesses alike.

The headline in December, 21 is that we are flying blind: 

1) Around December 1, the Automatic Identification System (AIS) showed a drastic reduction in the number of vessels leaving China. What’s important is that this doesn’t mean that our scheduled vessels didn’t leave. The issue lies with the interpretation of the China Personal Information Protection Act, which went into effect on November 1^st. Based on this law, many domestic providers seem to be extra careful and definitely erroneous and have stopped providing information to foreign companies. 

2) Port of Long Beach has only instituted a new queuing system in Mid-November. This system is still being tweaked, further confusing the estimated date of arrival. The number of ships awaiting berth has steadily gone up and is at record 90. The minimum dwell time off the port awaiting berth is 17 days. 

3) All or most of the imported cargo used to be bonded and had good visibility through the port in China, in-transit, the port in the US, transferred to trucking, a train yard, and eventually bonded to the warehouse, whether to US or Mexico. With minimal drops in the truck yard and 2/4 days in the train yard, visibility of containers location and movement was largely traceable. With container availability constrained and a dearth of empty containers, most importers have been forced to bring in containers from port to port. They are then transferred via trucks for expedited delivery. Trucking availability at the port is highly volatile based on trucking service, which gets the nod and has empty chassis to exchange. Truckers without returnable chassis have to wait for even a month or more. 

In our history of 12 years+ of managing the supply chain from China, we have never lacked visibility as we do now. 

• Ocean carriers do not know when they will be able to dock and unload their ships
• Port authorities don’t know when they can clear their grounds to make room to unload
• Vessel authorities cannot plan their loading points due to Covid in many places (Think HCM in Vietnam for almost seven weeks, Shanghai shutdowns in October, Guangzhou in September, Singapore in November, Indian and Srilankan ports randomly through the year).
• Trucking companies don’t have visibility to get empty chassis to plan their following route
• Container accumulation at every nexus point like St. Louis, Denver, Chicago, and others have caused shutdowns randomly

We are hoping for the following:

1. Chinese providers will come to their senses that the Privacy act is for personal information, and vessels leaving ports should be reported on time and proactively. 
2. LA/Long Beach ports clear their backlog by working 24/7 (unions are not quite ready for this!). This has been going on since October with very minimal improvements. 
3. We can get back to bonded loads giving us better visibility of containers from port to receiving warehouse destinations.

We don’t know how long will respective parties and government authorities will come to their senses and help resolve these. Till then, we are flying blind! Hits in working with China just keep on coming! 

References: 

https://www.freightwaves.com/news/california-pileup-still-piling-up-but-out-of-sight-over-horizon

https://news.yahoo.com/one-chart-shows-dramatic-drop-060805745.html