Do you remember the western port strike in the U.S.? Regarding negotiating a new contract, it was a conflict between dockworkers and their employers because of job security, restriction of wage increases, and opposition to automation of unloading operations. This issue was a significant concern for traders. To prevent this issue, they should ship their shipments to southeastern U.S. ports. At that moment, everyone thought the same way, and an even bigger issue arose. The Volume of shipments in Port of Savannah increased by 18.5% (89,918 TEUs) over the same month last year. As shipments explosively increased, the logistics costs involved also rose sharply. Port of Houston recently announced that they are considering costing an “Excessive Dwell Fee” for some containers to stay longer than free time. So why don’t traders arrange their containers?
The reason is that the red light has been turned on for inventory maintenance due to an explosive increase in loading shipments. Most companies send their products as much as estimated demand to a warehouse for their multiple channels. However, its sales volume recently was not achieved its estimated market due to the shrinking consumption trend. The warehouse was already stocked up to the limit, and the space in the warehouse was limited to handle the additional remaining inventory. Multiple channels, such as Amazon, Walmart, Target, and Best Buy, also, have been in trouble with inventory issues. Therefore, even though they have more than six weeks left before Black Friday, they started early sales for their inventory.
The above issues have been changed because Ocean freight from South Korea to the U.S. is cheaper than last quarter. Valuelink U said they expect the Ocean freight has been continued to decrease in the fourth quarter ahead of Thanksgiving and Christmas holidays as shipment demand slows. However, this news is not to be good news to traders. The ocean freight is decreasing, but inventory maintenance cost in the warehouse is consistently increasing because sales volume has a low global contracting trend of consumption. Until the trend of consumption increases, it will be the biggest challenge in the supply chain industry that deals with the long-term holding of containers and inventory.
Kim Link, W. (2022). Port of Savannah clearing record volumes despite vessel backlog. American Shipper. https://www.freightwaves.com/news/port-of-savannah-clearing-record-volumes-despite-vessel-backlog
Lori Ann, L. (2022). Big decline in warehouse shipments is latest sign of the consumer pullback. CNBC. https://www.cnbc.com/2022/10/10/big-decline-in-warehouse-shipments-latest-sign-of-consumer-pullback.html
Image – https://prospect.org/economy/hidden-costs-of-containerization/