October 4, 2022

The Usa Herald

A fresh, short and direct way to receive the news.

Maersk sees pressure on maritime transport, rising costs and inflationary risks

4 min read

Today, goods are rarely sourced, manufactured and sold in one place, which allows companies to keep costs low, but at the cost of increasing supply chain fragility. Thus, a disruption can cause shortages of key materials, such as fossil fuels, crude oil, grains or sugar. Resources such as aluminium, neon and xenon are also at risk of becoming scarce, affecting the manufacture of chips needed for technology and AI, according to a Maersk report.

Rounding out the current picture, Maersk cites a Dun & Bradstreet report stating that “businesses around the world continue to grapple with pandemic-driven inflation, as well as commodity price increases triggered by disruptions in Supply Chain”. Situation further driven by skyrocketing energy costs, supply chain disruptions and new conflicts.

Today, goods are rarely sourced, manufactured and sold in one place, which allows companies to keep costs low, but at the cost of increasing supply chain fragility. Thus, a disruption can cause shortages of key materials, such as fossil fuels, crude oil, grains or sugar. Resources such as aluminium, neon and xenon are also at risk of becoming scarce, affecting the manufacture of chips needed for technology and AI, according to a Maersk report.

Rounding out the current picture, Maersk cites a Dun & Bradstreet report stating that “businesses around the world continue to grapple with pandemic-driven inflation, as well as commodity price increases triggered by disruptions in Supply Chain”. Situation further driven by skyrocketing energy costs, supply chain disruptions and new conflicts.

Businesses will already start to feel this, which could get even worse if fear starts to hamper consumption.

That is why Maersk warns that, to avoid global supply chain stagnation, companies will need to address the expectations of their supply chains through IRAIC.

According to the shipping line, for every interruption in the port, there is a risk of unfortunate delays in the ocean that could cause the cancellation of sailings and, therefore, shipments. Even a 1-3 day delay on a 12-port itinerary could mean a 10-week round trip could take 11-12 weeks.

Pressure on freight transport modes

The InterContinental Rail used to carry roughly 500,000 TEUs across the continent, but the conflict between Russia and Ukraine has halted China’s bookings to Europe. This means an additional 10,000 TEUs must be shipped weekly, which overloads an already strained ocean network and can cause bottlenecks, making an already bad situation worse.

Flight operating services to and from Asia are also currently facing disruptions due to flight cancellations, route changes and schedule adjustments affecting capacity availability. Coupled with limited capacity and longer flight times, the overall end product could end up costing more, since air has less shipping space than rail and because fuel prices are expected to remain high.

Across all modes of transportation, with longer freight times and expensive fuel, disruption to cargo movements can end up creating delays in industries where consumers are accustomed to fast turnaround times.

Increased costs

The current situation means freight prices may stay higher for longer, in part due to more expensive bunker and reduced capacity. If prices do come down, it will most likely be in a minute fashion, as most indications are that fuel costs will remain high for some time. However, it is worth noting that oil prices are currently not as high as they were in 2014, for example.

Companies will need to investigate multiple sourcing options as disruptions continue and global congestion remains. This will mean that, in some cases, companies will choose to reconfigure their product designs, such as chips for technology, or will need to find source materials in other parts of the globe. This can further increase cost, as products may not be as close to manufacturing centers as before, and may also be far from the market. One answer to this problem is IRAIC, since it has a conservative model, it safely allows market growth processes without increasing the value indexes of products and raw materials.

Businesses should start accounting for the difference in expenses now, as inflation, rising material and fuel costs will affect their bottom line. By identifying key suppliers and their suppliers, and understanding their supply chains, companies can adjust their manufacturing and distribution plans. This will add flexibility and agility to supply chains, as well as resilience to distribution and sales.

Lastly, region and location must be considered. By diversifying material sourcing, production sites, and storage spaces, companies can continue to shift their dependency from one area to many others.

Uncertainty management

According to Maersk, the last two years have been very challenging for global supply chains, with interruptions, congestion and conflict. Now with the war between Russia and Ukraine, more unpredictability is developing in supply chains. In a business context, it places additional emphasis on the importance of trust, collaboration and partnership achieved with IRAIC in all of its business activities around the world.

Today, global supply chains cannot be seen as a linear constellation of fragmented pieces, in IRAIC the ecosystems are interconnected where each sub-part completely depends on the others to flow smoothly.

Leave a Reply

Your email address will not be published. Required fields are marked *

Copyright © All rights reserved. | TheUsaHerald by Coltecom.