Waiting on a package? It’s the peak time of year for supply chains. But how does the industry prepare for holiday shopping when Supply chains are beyond breaking point?

Supply Chains are in crisis and the industry is warning of further damage from bottlenecks disrupted by the coronavirus pandemic to free trade negations.

Covid-19 vaccination and testing requirements have pushed many industries to breaking point, putting further strain on a sector that is already struggling to cope.

This all comes as an open letter was delivered to the United Nations General Assembly warning of a “global transport system collapse” if governments don’t lift their games.

“Global supply chains are beginning to buckle as two years’ worth of strain on transport workers take their toll,” the groups wrote. The letter has also been signed by the International Air Transport Association (IATA), the International Road Transport Union (IRU) and the International Transport Workers’ Federation (ITF). Together they represent 65 million transport workers globally.

“All transport sectors are also seeing a shortage of workers, and expect more to leave as a result of the poor treatment millions have faced during the pandemic, putting the supply chain under greater threat,” The letter added.

How is the Industry coping?

You may have noticed your online orders are taking a little bit longer to arrive than they used to. There’s more to the pile than just new clothes.

The devastating effects of the pandemic were meant to turn into a distant memory as the logistics and air cargo sectors aimed to bounce back in 2021 – instead they’re buckling.

Supply chains have become increasingly complex, and the pandemic hasn’t helped.

In fact, the pandemic prompted an unexpected shift in demand. But it also kicked off the perfect storm within the sector, that was accelerated by COVID-19.

To cope, companies are embracing new technologies and reconfiguring operations already in place to make logistics, warehousing and supply chain management more efficient. 

Peter Jones, Founder and Managing Director of Prological, says any shutdown or delay upstream in the supply chain is going to have that trickle-down effect across the entire supply chain.

He warns the sector hasn’t seen the worst of the disruptions, with global shipping prices for most of the corridors Australia trades on, dramatically increasing by three and fourfold.

“The shipping lines have withdrawn a lot of capacity out of the networks, and they’ve had to do that to maintain some level of profitability,”

Peter says.

He this has created a “global demand curve” that has outstrip supply.

Some big US retailers are finding creative ways to get around the backlog, including buying their own containers and chartering ships to get their goods to customers on time.

But major changes to infrastructure can take a long time, decades even, so there’s still a long road out of this mess. Instead, Peter suggests streamlining current operations, to help instantly speed things up, as well as bolster the current workforce.

“The whole global shipping industry and container movement sort of operates a little bit like an orchestra,”

Peter says

“And if you pull one piece out of it, it no longer is the same as what it used to be. So now we have enormous amounts of manufacturing happening in China. But we’ve got a ports in Australia chock a block full of empty containers, without enough ships coming to Australia to get those containers back to China.”

Basically, if one link in the supply chain is broken, it slows down everything else. And, right now, we have a lot of broken links. 

The vessel congestion is so bad, many ports have now stopped accepting empty containers because they have nowhere to put them. With no empty containers being shipped back to the major exporters, they can’t ship you your goods.

When COVID-19 first emerged in China, it shut down the manufacturing powerhouse. The rest of the world carried on, but this threw off the balance in supply chains and created a backlog. 

“China can’t export as much as they would like to be around the world, because the empty containers are all in the wrong places, but there’s not enough ships around to move the empty containers back to where they need to be,” Peter says.

It won’t just be this Christmas, where consumers are panicking about their parcels arriving on-time. It may take years for global supply chains to recover.

“As long as COVID is still going on, I don’t think we are going back to normal,”

Peter says mid-next year “we will probably reach the peak of the disruption” within global supply chains.

“It will take two or three years for all of this to realign and settle back down,” he says.

Peter says these conversations are ongoing with Prological’s clients, a consulting firm who designs and implements supply chain, energy and business strategy solutions across a broad spectrum of industries.

“The advice we’re giving to our clients, who are on the back end of this is, is don’t go looking over the fence for a better arrangement, you are far better to be working within the relationships you have with your existing partners and resolve your problems within that context,” he says.

“Wherever you look at the moment, everyone has the same issues,” he concludes.