Supply Chain Update – Second Wave

Global media coverage surrounding COVID19 outbreaks provides us with valuable and often detailed information about public health and the initiatives to curtail the spread of the virus. We at Powertec wish to add our commentary around the current impact we are observing in the global supply chain through the representation of our client’s interests around the world.

Current Situation, Update:

The relentless impact of Covid19 has presented as waves of infections and subsequent lockdowns/disruptions to our lives, communities and countries. The impact on the supply chain has been very similar with the first big wave beginning in September 2020 causing capacity to disappear, equipment and manpower shortages with delays and rates surging. Since the Chinese New Year, we have remained hopeful that the situation had started to improve with rates stabilising, albeit at a high level, but as this disease has taught us, these gains can be short lived.

Supply Chain Shock – Second Wave

Demand:

As spring turns into summer across Europe, UK and the USA we see lockdowns ending and USA stimulus cheques arrive and with this an assumption that demand will surge from these markets causing delays to manufacturing and order fulfillment. Remember these factories in China, Vietnam and Thailand, in fact anywhere in the world, that produce and fulfill your orders for Australia are also producing and fulfilling orders for Europe, UK and USA. You must expect delays in production over the coming months.

Seafreight:

We are being advised by our global partners that shipments for the first half of May are being impacted by a lack of space on scheduled sailings and a lack of empty containers. Given reports of increasing congestion throughout Europe, UK and USA, some of which were exasperated by the Suez Canal blockage, we can only see this situation getting worse in the second half of May and BEYOND. Prepare for surging rates, delayed booking confirmations, shipments being rolled/delayed. Once again we are caught in a classic supply-demand imbalance that will negatively impact rates and reliability for some months.

Airfreight:

Australian borders remain effectively closed and airfreight capacity is constrained because of this with a lack of international flights. Cargo aircraft are in high demand and remain 100% utilised globally, the only real capacity available is dependent on international passenger aircraft flying to our shores. Returning Australians have provided a reason for some international airlines to continue flying, providing much needed capacity, BUT, variant strains of the virus have now changed the conversation to limiting international arrivals. If this becomes a reality it will mean fewer flights into Australia making it more difficult finding capacity for urgent shipments. When we factor in a demand surge and expected delays with sea freight our outlook supports reduced capacity and rising rates, as was the case late last year.

Our Advice:

Expect rates and capacity to deteriorate over the coming months, getting orders in early and maintaining pressure on your suppliers to ensure production is on schedule remains in your control. If possible allow for the extra time it will take to ship due to capacity constraints and shortage of containers, otherwise, early dialogue with your customers regarding delays should serve you well. Do not make any unrealistic promises regarding into store dates as this could have the potential of being as bad as it was last time around.

We offer our experiences/observations in order that you are aware of the impact on the international supply chain and what this means for your orders/production and the impact on your clients.

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