The availability of ocean carrier cargo containers in June 2024, coupled with the rising shipping container cost, rivals the worst days of Covid-19 and the supply chain snarls that came along with the pandemic.
While those days are long gone, new chokepoints are creating an unsettling sense of deja vu as container rates spike yet again. This is not a new trend, but one that has been building since late 2023, when shipping container costs for a 40ft container hovered around a more stable $1,500.00. That number has continually grown since, hitting $2,700.00 in late April, then a major jump up to $4,200.00 in late May, and again up to $4,700.00 in early June.
With fewer containers available as peak season freight shipping gets underway, the logistics world is yet again faced with the unenviable task of navigating these complicated supply chains while managing the rising costs. Shipping container cost is becoming a critical factor for businesses to consider.
The Container Conundrum
It doesn’t take much to cause problems. Think about this. Still today, about 90% of global commerce is carried out on the high seas. Meaning that the overwhelming majority of goods must journey on ocean carriers before reaching the final destination.
The situation that has led to these increased costs really started about a year ago as low water levels made navigation in the Panama Canal difficult, pushing many carriers to choose alternate routes, including around South America’s Cape Horn. From here the dominos have continued to fall, as terror attacks on the Red Sea have grown throughout 2024 diverting many carriers around the tip of Africa. Then the collapse of the Key Bridge in Baltimore shuttered one of the world’s busiest ports. Now severe weather in Asia and labor issues at various ports are exasperating an already tough situation.
These issues have forced longer voyages and in order to keep on schedule, many vessels have opted to save time at port by not loading up with empty containers. All of this is happening as preparations for peak season, including shipping of back to school and holiday goods to their destinations, is kicking into high gear. Consequently, businesses are more frequently asking about the current shipping container cost to plan their logistics.
Perfect Storm of Bad Timing
There is growing concern that peak season deliveries could be affected. Meaning, retail and ecommerce demand planners could be in for growing headaches as we head further into the summer months, and get closer to the most important time of the year for retail sales.
And, it means that the higher rates for ocean freight climb, the harder it will be to insulate consumers from the increased expense. As a result, understanding the shipping container cost becomes even more crucial for budget management.
If this situation continues to get worse, the most immediate impact could be seen in back to school inventory as parents begin preparing their kids for the new school year as soon as July. Right on the heels of back to school is the holiday season and if these issues in the supply chain persist, we could be in for a rough road to the core of peak season. Planning and ordering for peak should be complete at this point and manufacturers will soon be queuing up orders to hand off to freight carriers, when demand will be even higher for those containers.
The good news is that we have a window to act and do everything possible to stay ahead of this unfolding situation. Assessing the shipping container cost regularly can help businesses stay prepared.
Be Prepared and Plan for Anything
We have learned some valuable lessons over the last four years and it’s important that any retailer be considering strong solutions that can help mitigate these issues, which will likely grow as consumer demand grows.
Visibility & Communication
Being in the know, understanding the situation and knowing how it may impact operations and product availability is key. Follow disruptions and understand their residual impact and if you can’t figure it out, reach out to your suppliers and ask questions. The more quickly action here is taken the more effectively disruptions can be worked around.
Reimagine Warehouse Operations
Consider moving away from major distribution sites in metropolitan cities to several large hubs, served by strategically located distribution centers. Having several major hubs within a two- to three-day delivery time of 95% of American households is the model that is cost-effective and service-oriented. This allows retailers to make up for lost time once delayed ships make it to port and product finally starts closing in on its final destination.
Find a Strong Partner
A third-party logistics (3PL) provider like Boxzooka can be a strong solution for those with the resources. A true 3PL partner offers turnkey solutions and advice around warehousing, inventory efficiencies, SKU depth and velocity, purchase planning and other vital operations. Hire a 3PL with its finger on the pulse of the entire supply chain. They can also provide insights into current shipping container cost trends.
Technology is Your Friend
Technology is evolving all the time and adapting to the latest warehouse management systems (WMS) technology is paramount. The upgrades can be daunting and pricey but that shouldn’t deter any company working within the supply chain. A worthwhile WMS must help you grow your business and keep issues within your supply chain visible at all times.
With the process that leads up to peak season well underway, it’s important that retailers be in the know when it comes to these issues. Understanding the impact that will unfold in the months ahead arms planners with the information they need to proactively and strategically maneuver around these problems, so in the end the consumer isn’t any the wiser to the difficulty in meeting their demand.
At the same time, being in a position to react in a proactive way will help minimize the costs passed along to the end customer, a win-win for everyone!
