INDUSTRY INSIGHTThought Leadership

Container shipping: the challenges and the solutions

In a special interview with GPCA Insight Express, Christopher Cook, Managing Director – UAE, Oman, Qatar, Maersk, sheds light on the challenges and lessons learned from the container shipping crisis and shares his view on the “new normal” for the shipping industry moving forward

The container shipping shortage is a major challenge that’s affecting supply chains across the globe, and the chemical industry is no exception. Can you tell us more about the issue, and what are the reasons for this to happen more than two years since the pandemic?

The container shortage has been a challenge over the last 2+ years owing to three main reasons:

  1. At the pandemic’s start, it was because of the strict lockdowns in China, where the production of new containers fell by 40% in the first half of 2020.
  2. Then there was an imbalance between imports and exports in different markets, leading to empty containers not being where they were required.
  3. Productivity at ports has been down, and congestion is high, leading to longer waiting time for vessels at sea before they can discharge containers or for containers to be stuck in transit

During the period of the pandemic, when the industry was facing an actual shortage of containers, 5.9 million TEUs (Twenty-feet Equivalent units of containers) including around 745,000 reefers (refrigerated containers) were in-fleeted. This represented a 12% growth in the total container fleet of the industry – one of the largest in-fleeting done by the shipping industry to tackle the container shortage crisis.

The next two reasons, which are more recent issues, have been tackled through several operational solutions as below:

  1. Resilience in operations
    • As logistics partners, solutions that will bring ease, speed, predictability, and flexibility to customers’ supply chains are required
    • Clear and relevant delivery promises from both sides must be institutionalized with guaranteed fulfilment and high predictability in customers’ supply chain enabling them to reduce inventory costs and better capture market opportunities
  2. Adoption of digitalization
    • Digital solutions that provide increased visibility and performance management to enable planning ahead and taking timely mitigating actions have become essential to supply chains
    • There is a need to modernize our infrastructure with digital solutions and drive standardization to reduce complexity in supply chains
    • Automation and leveraging IoT across physical assets to ultimately have better control on their movement will help us have the right equipment at the right place at the right time

The imbalance between demand and supply was caused due to the large stimulus being paid in the western markets. With people not being able to spend their money on experiential activities, there was a rising demand for goods in the market. This meant a lot of consumer items had to be transported around the world with not enough capacity available. However, with lockdowns reducing in different parts of the world, there is some normalization that will return to the demand and supply equation eventually and the imbalance will reduce with it.

The solution to the container shortage crisis would require a multi-stakeholder approach. What in your view is needed to solve the shortage and restore the smooth functioning of the industry once more?

On a broader level, every stakeholder in the supply chain needs to be an active participant in creating an ecosystem that is better prepared for such crises in the future. Prior to the COVID pandemic, we, as the logistics partner, would do an annual plan of equipment requirement and deployment as per the needs of the market. Now, we are doing the planning at least twice a year and adjusting it, if necessary, through constant dialogue with our customers/partners and understanding their requirements more proactively.

We are also more proactive in pre-empting the market requirements by studying the customer behavior and acting rapidly. For example, we have lockdowns in China due to a current COVID outbreak. However, we are prepared to tackle the situation by having adequate equipment already available in the region. This means that when the restrictions are lifted, there is usually a sudden surge in demand and we are in a position to handle it.

Enough thought needs to be put into being able to predict the changing consumer behaviors. We have seen a drastic change in the way retail buying has converted to eCommerce in recent times. This calls for a different level of thinking and forecasting how the demands change in the market and be prepared with solutions that cater to them. We must leverage the data from the market to make this happen.

During the coronavirus pandemic we saw a trend of supply chain onshoring. Is this trend continuing at the moment, and what risks and benefits does it present?

With international borders closing and no sight on how and when they would open, there was a lot of talk around nearshoring and reducing the dependence on global market. However, given the nature of the global trade, availability of resources and capabilities of production and procurement, it does not look like nearshoring can take over global trade any time soon. However, manufacturers are looking at options for multi-sourcing to ensure that they are not dependent on specific geographies for all their requirements. This will continue to develop over the years and we will see more markets being connected to the global trade from both manufacturing as well as consumption perspective.

The COVID-19 pandemic accelerated the digitalization of supply chains. Are you seeing this trend continuing currently and what challenges/gaps is the logistics industry still facing when it comes to technology adoption and digitalization in your view?

Digitalization has been one of the key highlights of what the industry gained out of the pandemic crisis. The digital transformation that would have otherwise taken years, got accelerated and we have already seen a lot of solutions becoming mainstream in supply chains. Overall, there is also a much higher level of acceptance for digitalization than there was some years ago.

The biggest challenge for digitalization has been the adoption across all stakeholders of the supply chains. This is especially noticed when we look at solutions such as TradeLens, a blockchain-underpinned platform that offers great visibility and allows electronic transfer of documentation. Unless all the stakeholders in the supply chains across the entire journey of the cargo are not onboard with the platform, it will not function at its best efficiency.

What will the “new normal” look like for the shipping industry moving forward considering all the major disruptions taking place currently, and how can chemical companies prepare for the new era?

We live in an ever-evolving world. What the pandemic did was change and accelerate the course of evolution for all of us. The disruptions in supply chains changed the way we operate and did it for the good eventually. We have found new ways of working that are far more resilient than before. We are collaborating with customers and partners far more than before. We have digitalized our processes and systems. We have diversified solutions to make them even more suitable for our customers. We are providing integrated solutions to customers that connect and simplify their supply chains. We have accelerated out sustainability goals and are acting on a green future already.

These are all the elements that make the new normal up. It is a better version of yesterday, and it has come sooner than it would have in normal circumstances.