What you will learn in this article:
Why container shipping is under pressure in 2021
Container Shipping Outlook for 2022
Supply Chain Trends in 2022
As Christmas and other big festivities are just around the corner, the international shipping industry is under high pressure. With over 80 container ships currently waiting outside docks in Los Angeles and Long Beach, California, the ongoing challenges in shipping remain. Cargo delays and more disruptions are hitting businesses all around the world and seem not yet to ease up.
While 2021 was a year like no other, we have compiled the status quote and how container shipping capacities will look in 2022.
Why is container shipping under pressure in 2021?
2021 has been challenging for container shipping. But why are we experiencing issues all over the place? Here are the key reasons:
Changing consumer behaviours: Around the world, households adapted to the pandemic and started to buy more consumer goods – instead of purchasing services such as touristic activities or going to restaurants. This led to an increase in production of goods and with that also transportation of those. Especially container transportation from Asia – a major centre for global consumer goods production – experienced an increase.
Port congestions: Being impacted by Covid-19 infections of port workers, ports around the world experienced partial shutdowns, such as the Meishan terminal, in August 2021. This put further pressure on global supply chains.
Lack of containers: Freight containers are essential equipment for global trade, providing the ability to efficiently handle large volumes of consumer goods, apparel, manufacturing parts and other materials across today’s supply chains. While the pullback in production in recent years may have contributed to today’s shortages, the disruption triggered by the pandemic has been the main factor decreasing availability in 2021.
Trucking challenges: Especially the UK and the US experience a shortage of road haulage drivers. Brexit and Covid-19 are the leading causes for the current haulage situation. Another factor is that ageing truckers retire early. For example, the average age of haulage drivers in the UK is 55, and less than 1% are under 25.
Suez Canal blockage: The six-day blockage of the Suez Canal by the containership in March 2021 impacted global trade further. The incident led to port congestions, further container delays and declined the annual global trade growth. German insurer Allianz estimated that the blockage could decrease annual global trade growth by 0.2 to 0.4%.
This all has led to container delays and capacity shortages. And it seems like that some of these factors might also have an impact in 2022.
So, what's the shipping outlook for 2022?
Of course, we don't have a crystal ball to foresee shipping in 2022. However, analyses and forecasts are predicting some future scenarios for the new year.
Looking ahead, Maersk expects the exceptional market conditions in shipping to persist until the first quarter of 2022 or longer. Not at least because Chinese New Year will cause further challenges to already disrupted global supply chains.
Economists from Goldman Sachs assume that backlogs and elevated shipping costs are likely to persist at least through the middle of 2022. A reason for that is that there is no immediate solution for the underlying supply-demand imbalance at US ports is available.
On the demand side, high household savings in the US and Europe should support consumer demand, but the composition of spending is likely to rebalance towards services in 2022. But on the supply side, supplier delivery times remain lengthy, and there is little visibility into when capacity constraints, including landside bottlenecks in trucking and warehousing, will diminish. This means, moving forward, businesses like yours need to further adapt to flexible supply chains and enhance their supply chain forecasting.
What are the 4 leading Supply Chain trends in 2022?
Supply chains saw massive shifts in 2020 and 2021, as the COVID-19 pandemic and its effects impacted countries and businesses around the world. So, what are the supply chain trends in the next year? Let's take a look at a few of the major trends…
1. Digitalisation: A McKinsey survey found that the pandemic drastically accelerated the digitisation of customer and supply chain interactions by three to four years – within just a few months. Grand View Research predicts that digital transformation will impact small and medium-sized enterprises (SMEs) most of all, enabling companies to access advanced software such as data analytics, ERP and inventory management. Moving forward, businesses will further focus their efforts on building better digital-first interactions with customers. At Twill, our vision is to accelerate digital logistics for SMEs through digitilisation. You can check it out for yourself by signing up to our platform - it's completely free to check prices and schedules.
2. Changing consumer patterns and inventory management: During the pandemic, many international trading companies moved their inventory management from "just-in-time" to "just-in-case", showing an increased demand for visibility and predictability in global supply chains. It is however too early to tell if the trend is here to last: A study from Capgemini found that 39% of organisations expected to shift from just-in-time to just-in-case sourcing and manufacturing in the coming years, up from 29% of organisations pre-COVID-19. But when bottlenecks ease some companies may revert to the more cost effective “just-in-time” inventory management again.
3. Sustainability: With COP26 recently having taken place in Glasgow to shed light on climate change issues, sustainability in supply chains is under a strong focus in 2022. At Twill, we are proud that our partner Maersk has taken a clear stand on sustainability. For instance, Maersk has announced that it will operate the world's first carbon neutral liner vessel by 2023. Additionally, a further series of vessels in 2025 will replace older vessels, generating annual CO2 emissions savings of around 1 million tonnes.
4. Local is the new global: During the pandemic, when access to global supply chains was disrupted, some companies in the logistics industry found new and significant opportunities by going local instead. By gaining more benefits, it is expected that local sourcing might grow within the following year. This way, companies can avoid the risk of economic or political challenges, gain better control of delivery times and reduce carbon emissions by producing and shipping their products locally.
Staying ahead of trends and forecasting your supply chain for 2022 can help to limit disruptions. Over the past years, we have learnt a lot from the severe changes of Covid-19. Moving into 2022, flexibility will be a top priority for your supply chain management.