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2022: The Year of the Supply Chain Disruption and Rising Freight Costs

Updated on 07/01/2022

Rising Freight Costs affecting Supply Chain

The freight forwarding industry is looking at a challenging 2022, driven by surging shipping costs, tightening capacity, and an environment fraught with supply-chain disruptions. As we delve into the forces behind these challenges, it's essential to note that the rippling effects of these issues could lead to higher consumer prices if we fail to resolve the pre-pandemic issues.

Rising Freight Costs: Witnessing an Unprecedented Surge in Shipping Costs

Last year, we faced a surge in shipping costs, the likes of which we hadn't seen before. This dramatic rise was the result of a potent combination of factors that arose from the unique circumstances presented by 2021. The driving force behind this surge? An unprecedented demand spike in the 3rd and 4th quarters of the year, primarily fuelled by consumers worldwide locked down at home and spending more on goods and services.

The Pressures of Increasing Demand and Tightening Capacity

As we move into 2022, the aftershocks of the preceding year continue to be felt across the industry:

  • Higher demand: An elevated level of shipping demand continues to push operators to their limits. As the consumption patterns that emerged during the lockdown continue to persist, we are seeing relentless pressure on shipping operations.

  • Tight capacity: Worldwide shipping and logistics face another significant hurdle - tight capacity. As demand outstrips supply, the industry grapples with balancing the scales.

With these twin challenges in play, operators may be forced to reconsider their pricing structures, potentially leading to an increase in freight prices when negotiating new contracts. This possibility is particularly pronounced for parcel delivery, warehousing, air and ocean shipping, and land trucking.

Port Congestion: A Global Phenomenon

Adding to the industry's woes are worldwide port congestions, particularly in the major economies. As the flow of goods increased in response to consumer demand, ports around the world began to experience bottlenecks. The intensity of these disruptions was exacerbated to a higher level due to the already existing issues.

Disruptions in Vessel Schedules

Shipping schedules have also borne the brunt of these disruptions. 2021 saw a steep rise in container rollovers, with increases of up to 45%:

  • Increased transit times: As a result of the rollovers, shipping has been further delayed due to increased transit times.

  • Blank sailings: A rise in blank sailings has also played a role in shipment delays. These scheduled sailings, where the ship does not carry cargo, have a knock-on effect on shipping times and costs.

Both these factors have contributed to an overall global supply chain disruption, highlighting the multi-faceted challenges the industry faces as we move into 2022.

The Path Ahead

As we brace for the rising freight costs and continued disruptions in 2022, we must strive to navigate these tumultuous seas with resilience and adaptability. By understanding and addressing the underlying issues, we can work towards mitigating the impact of these challenges on consumers and the global economy. The road may be rocky, but with concerted effort and innovative solutions, we can chart a course towards stability and growth in the freight forwarding industry.

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