After nearly two years of strained global supply chains, which have entangled shipping routes due to the pandemic, extreme weather and a notable canal blockage, ship operators around the world believe it is time to build resilience. of the shipping ecosystem.
"What we're seeing now is to some extent a consequence of our previous industry-unique focus on efficiency and just-in-time delivery," Jens Eskelund, chief executive of Maersk China, told Fortune Global 500 on Tuesday. Summit in Hangzhou, China.
Most supply chain analysts have pointed to just-in-time manufacturing, a strategy that encourages manufacturers to keep minimal inventory in their own factories to save space and cost, as the bogeyman responsible for the current supply crisis. Supply Chain.
In just-in-time manufacturing, if a component is late or difficult to source, it can upend entire production runs. And in the last two years, such outages have become commonplace.
Global supply chains are still reeling from the whiplash caused by government-imposed city lockdowns in 2020 to contain COVID-19. Initially, lockdowns in China closed factories, shutting down much of the supply side of global shipping. Then, lockdowns in the US caused a spike in demand as people ordered electronics and gadgets to make working from home easier.
Many other isolated disruptions, such as China briefly closing shipping ports in August and June to prevent a COVID outbreak, and the US resolving impediments to its shipping schedules.
According to Bloomberg, 77% of ports around the world have unusually long response times. Numerous ships are anchored off the coast of US and Chinese ports, waiting for berth space.
The turmoil has pushed ocean freight costs to record levels, up more than 300% year-on-year since August, prompting some exporters to hold back on shipping low-margin products. Shipping costs are now falling, roughly halving between September and October, but the docks won't be able to handle ship congestion any time soon.
However, proponents of the just-in-time manufacturing model argue that shipping goods around the world was never part of the just-in-time mantra. Just in time, advocates say, requires manufacturers to be closer to their suppliers. Therefore, shortening supply chains through local production and avoiding long-distance transportation is the best way to strengthen supply chain resilience.
The US, EU, Japan, and China are trying to land semiconductor manufacturing. Delays in shipments of key semiconductors were the most prominent example of global supply chain problems. But Eskelund says slow, expensive ships aren't the only loose link in global supply chains.
“No particular aspect of the transport chain can be singled out. [The interruption] affects all elements [of the transport chain]. It's the warehouses, the rail, the trucks, the shipping lines,” says Eskelund. "For the future, we really need to look at [reforming] the entire transportation chain."