In the shipping world, “peak season” is sometimes synonymous with shipping delays and rate increases. This year, carriers are seeing the biggest interruptions on channels handling exports from Asia. For shippers trying to bring goods into the U.S., this can add as much as two weeks – sometimes even more – onto the typical transit time.
Carriers are confirming large volumes from Beneficial Cargo Owners (BCOs) for the coming months, giving them the upper hand to raise rates for the limited space left on their vessels. Space will be tight throughout September, and considering the losses most carriers suffered during the first half of 2016, shippers should expect to pay a premium this peak season.
The recent loss of Hanjin vessels will also play a major role this peak season as the company recently filed for receivership. Hanjin handled 26,500 TEUs per week and ranked 4th in the US market, causing a major industry shakeup. Space will be even more scarce, as carriers cannot make up for such a major loss. GRIs will be maintained and PSS will be applied to base ocean freight rates starting September 1st and 15th.
A Perfect Storm
There’s no one reason carriers are experiencing these delays right now. Obviously the increased traffic in shipping lanes this time of year plays a huge role, as Walmart and other large chains stock up on their holiday inventory. These large chains are given priority on vessels, especially during this time, due to their steady volume throughout the year.
Because of the high volume of products that need to be shipped, there isn’t enough room in containers and ocean liners fill up fast. Another indirect effect of the season is that suppliers must scramble to keep up with orders, which can lead to a backlog and additional delays in the supply chain.
Another cause is that vessels increasingly fall out of operation as they suffer wear and tear, and maintenance crews must work overtime to address issues and make ships seaworthy again.
Lastly, a general lack of space and equipment leaves shippers impatient to push their goods through shipping lanes. It doesn’t do any good to have orders prepped if there’s nowhere to store them or no equipment to load them onto vessels.
How to Prepare
The first solution is to think ahead. For example, placing orders when you still have inventory available for the next three months can give you some flexibility in terms of when you need the next shipment.
If you’re sending cargo, try to plan on pushing out to sea about two weeks before you usually would – this gives you a safe buffer and hopefully means your shipment gets to the destination port right around when it needs to be there. It’s also good to add about ten days to estimates of when shipments will arrive so buyers won’t feel let down.
The second solution is to think strategically. If you have the means, split your shipments between multiple vessels. That way, if one gets stuck in transshipment you still have merchandise.
Also, if you consider multiple carriers the week or so that you have to wait to ship, it could balance out with the longer transit of another carrier and actually end up saving you money. On the other hand, searching high and low for carriers that can meet your time constraints is usually a less profitable strategy. This typically means paying a premium for space on the ship, while if you can afford to wait you’re likely to get a better deal.
One Final Thought
When calculating the potential duration of delays, keep in mind that CBP will likely hold and inspect your cargo once it discharges at the final destination. The busier the ports are the longer it takes CBP to complete this process, so don’t mistakenly believe you are in the clear just because your merchandise has arrived at the port.
