Warehouse & drivers shortages 'logistics threat' - Sedgwick

Sedgwick National Marine Manager Darin Miller says although container rates have normalised, a lack of warehouses & truck drivers might extend cost crisis

After two years of sky-high shipping container costs, prices are returning to normal levels – but other serious shipping problems now threaten to extend the inflationary cycle in logistics, warns a leading global marine expert.      

Darin Miller is National Marine manager at Sedgwick, a global provider of integrated business solutions that employs 30,000 people worldwide.

He told Supply Chain Digital that the post-pandemic phase of logistics is “showing signs of normalisation, especially in regards to container rates”.  

During Covid, container rates went through the roof, with some carriers asking for up to $18,000 per container, increases that for the most part were passed on to consumers, and that was an early driver of the persistent inflation we’re seeing now. 

Pre-pandemic, a container cost between $1,200 and $1,500, and Miller says this is around the current rate today.  

But he adds that “serious gaps still remain in supply chain logistics”, going on to explain that “as the economy hovers between slowdown and recession there’s now an excess of inventory with nowhere to go”. 

Container shortage has become warehouse shortage

He says: “A year back the industry was bemoaning a container shortage, but now we now have a warehouse shortage. There’s nowhere to bring the goods once they arrive at port, so they stay there, in their containers, clogging up the terminal. 

Historically, Miller says, haulers would be given a certain number of free days at the port to pick up their container, bring it to a third-party warehouse, unload it and bring the container back for drop-off at the port. 

“But not now,” he says “Now, containers left at port can be penalised for staying there too long, on top of any applicable demurrage charges.”

Demurrage is a charge payable to the owner of a chartered ship on failure to load or discharge the ship within the time agreed. 

Miller continues: “While production has ramped back up and manufacturers and vendors are shipping again, we’re seeing that overall demand for goods is down.”

One cause of this, he says, is that the lifting of lockdown caused an ongoing trend of consumers spending their money on experiences, services and tourism, rather than products.

But he also points out that many of the goods people are buying are being home-delivered, which Miller says is causing another problem: a shortage of truck drivers.

Truck driver shortage ‘root problem in logistics’

 “We could see the port-based warehouse shortage being compounded by the trucker shortages, which is a rooted problem in the freight industry,” says Miller. 

In the US, it’s estimated that a further 63,000 truck drivers are needed to satisfy current delivery demand.

“Not only could these freight-related hold-ups result in inflationary costs but they’ll also slow down delivery times between port and end user,” warns Miller. 

In the ocean freight environment, meanwhile, Miller reveals bookings have “slowed considerably”, and adds that “we’re seeing a considerable number of vessel cancellations”. 

He continues: Since shipping companies are not going to put a half-empty ship to sea, they’ll cancel the voyage and wait to load more cargo, which will delay delivery. 

“This holding pattern of ships is sure to continue well into the year, and if we end up in a recession it will only get worse.”

“It’s interesting to think shipping companies will have gone from record profits in 2021 and 2022 to feeling the pinch because demand for goods is dwindling,” Miller observes.  

Looking ahead, he says all industry players “will need to reconfigure their relationships” if they are to mitigate future disruptions like those that stemmed from Covid. 

“Technology will support these conversations,” he says. “We’re entering a transitory time where the old way of doing things, such as forecasting, are about to be turned on its head. AI is revolutionising every industry it touches.” 

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