Ina Opperman

By Ina Opperman

Business Journalist

The broken links in the global supply chain

The South African supply chain has been damaged too, but is still delivering the goods, albeit slightly late, says Hein Jordt, managing director of Ctrack SA.

The broken links in the global supply chain are primarily due to ships waiting for up to three weeks outside harbours on the west coast of the US, on the busiest shipping trade route in the world between China and the US.

The busiest route is no longer across the Atlantic between the US and Europe, with this traditional route only in third place, with the route between Asia and Europe in second place. The same trend is now also showing for air freight, according to the Ctrack Freight Transport Index.

“It is no secret that the global supply chain is broken and facing unprecedented disruptions caused by the Covid-19 pandemic, as well as a variety of external factors in various markets. The uncertainty and unpredictability of doing business in this environment once again highlights the importance of a reliable tracking and logistics management partner,” says Hein Jordt, managing director of Ctrack SA.

ALSO READ: Global supply chain is broken and South Africans are about to feel its pinch

The heart of the broken global supply chain

Supply chain disruptions cause massive swings and backlogs in international trade, but despite an increase of 15% in containers arriving, the busiest ports in the United States still close their gates at night, leaving more than 60 large container ships waiting to dock outside the ports of Long Beach and Los Angeles over the past few months, he says.

Capacity constraints are also evident in Chinese ports, but often they are simply waiting for ships to return from the US ports.

Ongoing disruptions to the global supply chain, such as the Ever Given getting stuck in the Suez Canal, riots and computer hacks in the port of Durban, electricity shortages in China and Europe and the general mess caused by Covid-19, made this even worse by also causing a container shortage, Jordt says.

The index shows that sea freight container volumes are up 13.2% on a year ago globally, while air freight has increased by 8.6%, although this is still 10% below its all-time high before the pandemic started.

Vaccine distribution is often a priority, meaning that other freight must wait. The congestion at US ports also means that containers are stuck on vessels, causing delays, leading to further delays in arriving in South Africa. 

ALSO READ: Transnet ports still operational, despite multiple fires

South Africa has own broken supply chain issues

South Africa had its own supply chain problems, with the riots in KwaZulu-Natal in July and the Transnet hack shortly after, the index shows. The broken global supply chain has been felt locally by the internationally linked freight sectors of sea and air freight over the past three months.

The impact of the disruptions is clear: South African sea freight has declined by 6.8%, and air freight by 15.8%, although air freight recorded the second highest increase year-on-year, with a change of 42.5% but off a very low base, according to the index.

Jordt says air freight is growing worldwide in response to the skyrocketing rates of sea freight, making air freight more viable in some cases. However, due to the nature of the capacity constraints, a low volume destination such as South Africa loses some traffic due to high margins elsewhere, which diverts specialised planes and containers from local routes.

ALSO READ: Supply chain drama just adds to the ongoing Covid pain

Overall index shows impact of broken global supply chain

The overall index recorded a 0.6% increase over the quarter ending in August, reflecting the overall impact of the riots and warehouse looting, as well as the Transnet container hack. The month of August has already seen a positive impact due to rebuilding and restocking efforts, but this must be carefully considered as the global supply constraints are yet to be factored into this algorithm.

Despite the disruption in the ports and the main roads in KwaZulu-Natal and Gauteng, road transport returned to a growth trajectory that saw it grow by 4.3% compared to the previous quarter.

However, retail stock levels declined and retailers had to source stock from warehouses they do not usually use due to ships not offloading as much cargo. At the same time, the rebuilding and restocking of some shops helped the road freight sector. 

While it is clear that the Transnet hack and the riots exposed the South African freight transport sector to several unusual risks, many manufacturers and retailers are concerned about Christmas stock levels, while toymakers and book retailers have issued warnings about increased shipping costs.

ALSO READ: Supply chain woes to stretch into 2022, US warns

Late and costly shipments

Shipments are currently running on average eight weeks late, which means that goods that were supposed to arrive in September are now only expected in December. This could mean that stores in many parts of the globe will be understocked when the Black Friday weekend comes.

According to the Wall Street Journal, the cost of renting a 40-foot shipping container has increased 10-fold on the China to US and Europe routes, which means that South African trade could also expect higher prices.

Road freight costs are also expected to increase way beyond current inflation levels with oil prices at a three year high, while the cost of storage in some areas is also set to increase as insurers insist on additional security measures.

On the other hand, rail freight once again recorded a decline due to stoppage during the riots and in some cases due to cable theft across the country.

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