The global pandemic has affected nearly every aspect of daily lives, from how we interact with others on a personal basis to how we conduct commerce.
Cable Plus has faced the same challenges as other businesses in that the coronavirus has interrupted our supply chain from time to time. While we continue to go above and beyond to help you get the solutions you need to connect your networks, we thought discussing how the world is linked together via supply chains will provide a better perspective on today’s shipping and inventory challenges.
For decades, American businesses have off-shored production for cost-savings. And the nations that we’ve outsourced to have themselves sent production to southeast Asian factories, where various parts and components can be made for less.
That’s just good business sense, right? Well, it was before the pandemic, and it might be once again when COVID-19 is in our rear-view mirror. But for now, factories and exporters in Indonesia and Vietnam are struggling to contain the delta variant and manage production slowdowns, which both have an adverse impact on the supply chain.
There has also been a pair of factory fires in Japan that directly impacts the connected world. One factory makes advanced sensing devices and the other manufactures fiberglass used in circuit boards. The result is shortages, which aren’t just for toilet paper anymore.
For instance, consider semiconductor chips. With lead times about a year out, the high demand for chips could see shortages last well into 2023 and beyond. This affects the production of computing and networking devices, vehicles, smart home devices, gaming consoles, and many other goods.
Companies have always focused on having greater access to supplies — and at lower costs — over their direct competitors. Now, companies across multiple industries are in an overheated competition for the same supplies, such as chips.
Production slowdowns caused by COVID-19 and resultant shortages don’t exist in a vacuum. They also affect shipping, which is where the supply chain experiences all kinds of disruptions.
To begin, China recently shut down the ports of Shenzhen and Ningbo due to virus outbreaks. China is
so determined to stamp out the virus that Ningbo, the world’s third-busiest container port, was closed for two weeks — after only one dockworker tested positive.
Next, ocean cargo prices have increased by a factor of six, with the median cost of shipping a 40-foot container from Shanghai to Los Angeles skyrocketing from $1300 in February 2020 to nearly $7800 in August 2021. There are also bidding wars to secure space on cargo ships. With shipping prices rising, some exporters have decided to cancel shipments altogether.
What caused the spike in shipping prices? A shortage of another kind. There just aren’t enough shipping containers to go around for lucrative North American and European routes.
Currently, there is a glut of empty containers sitting in South American and African ports and rail yards. But they’re not being picked up because COVID-19 has caused labor shortages across all industries, with shipping being no exception.
A shortage of containers in Asia, North America, and Europe further delays companies from getting their goods on board a vessel. In addition, cargo ships are leaving port much later than normal and losing their docking slots at destination ports.
Will shipping firms pick up empty containers from these less profitable destinations when the world bounces back from the pandemic? Stay tuned!