Some eCommerce firms can potentially overlook the “de minimis” value. Many business people need clarification on de minimis, particularly those unfamiliar with international shipping. We do know that it’s an essential part of the customs charge. For eCommerce firms, de minimis is crucial as it affects the total amount your consumers must spend.

_{De Minimis: A Vital Tax Exemption – National Foreign Trade Council (nftc.org)}

Awareness of the import duty rates by country, mainly where you send products, can help you better anticipate and control additional expenses. In turn, consumers get a more efficient and transparent delivery experience.   

Many countries have a set de minimis threshold for processing shipments without paying taxes or customs charges. Nevertheless, each threshold depends on local currency and differs from nation to nation. Furthermore, some countries charge taxes on everything because they lack a de minimis rule. However, other countries will have no customs fees, and nothing is taxed. Furthermore, shipments may be subject to one tariff but not another due to differences in certain nations’ de minimis duty and import tax criteria.

Knowing the de minimis threshold is essential for companies engaged in cross-border eCommerce to determine the overall cost of international product delivery.

Making Sense of Import Duty Rates By Country

De minimis thresholds and your eCommerce brand are related because of the expenses you incur, which also affect your customers. Should the de minimis value be high, your clients in that market can enjoy lower costs. If it’s low, customers might have to pay import taxes, reducing the appeal of your products compared to other alternatives.

If you fail to consider de minimis values, your clients may be surprised with unexpected customs fees. This may impact customer satisfaction and, consequently, your brand’s reputation.

If you want to run a successful international eCommerce firm, your shipping plan must consider import duty rates by country. This will assist you in upholding consumer confidence and being more open and honest about your prices. 

Complete Guide to Import Duty Rates By Country in 2024

De minimis values are advantageous for business-to-consumer (B2C) and eCommerce orders since they usually have minimal value and are exempt from duty and tax. Setting a de minimis value allows for quick customs clearance and more competitive selling opportunities across various marketplaces.

_{Understanding De Minimis Thresholds for Ecommerce | DCL Logistics (dclcorp.com)}

As of the time of writing, below are the de minimis values by country based on research done by Zonos:

De minimis is a finely calibrated figure impacted by a wide range of political and economic considerations rather than a set or arbitrary value. eCommerce companies need to be aware of these import duty rates by country to handle international shipping laws and expenses properly. 
ZhenHub is your trusted logistics partner in navigating the world of international eCommerce. Our global network of fulfillment centers simplifies cross-border shipping. Sign up on our website for free to get started with sustainable business scaling. Contact our fulfillment experts for further details on de minimis calculations per country.

Businesses must keep proper documentation, assure correct cargo values, stay current on market thresholds, and often monitor official customs websites for revisions to comply with de minimis requirements.

The Philippines depends on domestic aviation freight and road networks to support the rest of its 7,000 islands. In recent years, the Philippines’ business logistics sector has grown tremendously. This is a result of the nation’s advantageous geographic position, which makes it a prime hub for logistics businesses. By 2027, the freight and logistics market in the Philippines will be expected to grow at a rate of over 7%, with a total value of 23.7 million USD.

As cautious consumers stayed home to avoid coming into contact with COVID-19, the pandemic boosted eCommerce across the country. This trend persists as more people shop online and more merchants go online. The Department of Trade and Industry (DTI) of the Philippines reported 1,700 online vendors in March 2020 and 93,318 by January 2021.  That’s a staggering 192% jump before the pandemic started.

The Philippine Shipping Industry at a Glance

The rapid growth of the Philippine shipping industry is due to the rise in eCommerce demand and the government’s increasing infrastructure spending.

The pandemic fueled the growth of online businesses and sped up online buying nationwide. eCommerce, food and beverage, manufacturing, electronics, automotive, and pharmaceutical industries are significant revenue generators for the Philippine logistics business.

Over 90% of trade in the Philippines is moved by sea, making the shipping sector a considerable part of the nation’s economy. Understanding the industry’s prominent characteristics and infrastructure as an eCommerce retailer will help you effectively and efficiently deliver your products to clients.

The extensive network of ports in the Philippines, which includes 23 major ports and more than 100 minor ports, is dispersed around the nation. It’s a noteworthy aspect of the country’s maritime business. The Philippine Ports Authority (PPA) is in charge of maintaining the effective operation and growth of the ports.

There are several shipping firms in the nation, with over 350 registered with the Maritime Industry Authority (MARINA). These businesses run a range of ships, from little coastal ferries to huge container ships.

The Philippine shipping industry has recently experienced major infrastructure modernization with the building of new ports and the purchase of modern vessels. Tracking and management systems are being updated with application of cutting-edge technology like electronic data interchange (EDI) and global positioning systems (GPS).

A 2021 OECD report states that the Philippines’ market for logistics transport services is worth $11 billion. Road and sea transportation each contribute 40% and 35% of the industry’s 4% GDP for freight transportation. Most of the country’s numerous islands are served by road transportation for carrying commodities to and from ports. Both local and foreign cargo is transported using maritime means.

Challenges Faced by the Philippine Shipping Industry

The Philippine economy continues to grow due to the nation’s expanding population and rising domestic consumption. Additionally, the logistics and transportation sectors also develop as the economy grows. The requirement to transport commodities increases along with their creation and distribution. A large archipelago of thousands of islands makes it a complicated geographical structure. But there is an opportunity here.

Underdeveloped Logistics Network

The logistical infrastructure in the Philippines is underdeveloped. Metro Manila experiences traffic congestion frequently, ranking 18th worst globally in 2021. You can anticipate lengthy shipping periods, despite promises by the Philippine government to repair and upgrade the country’s infrastructure. Only domestic flights and smaller aircraft are accommodated at certain smaller airports across the nation. Due to their reduced size and constrained cargo capacity, these aircraft can only transport a certain quantity of cargo between airports.

You will need to wait for a different aircraft that will go to a particular province if the amount of cargo is greater than the plane can carry. To avoid this, you might communicate with your customers with controllable expectations.  It’s best to provide a realistic estimate of your delivery dates. 

As mentioned earlier, the government has made large investments in infrastructure developments. The previous administration’s “Build, Build, Build” (BBB) program is set to introduce 75 new planned infrastructure projects, which include ports, railways, toll roads, and airports. The current Marcos administration plans on expanding the previous program with the “Build, Better, More” (BBM) initiative. With a proposed budget allocation of P1.196-T, the new infrastructure program plans on augmenting commuter railways and upgrading national bridge infrastructures.

Tropical Weather

During the annual rainy season, which lasts from June to October, deliveries are susceptible to weather delays. The Philippines often goes through 20 typhoons a year, which delays shipments. These events result in flight cancellations that affect millions of air freight shipments nationwide. Similarly, cargo transfer by land is hampered during typhoons due to blocked roadways and hazardous road conditions.

However, sea transport and shipping are very robust and reliable, even during tropical storms. The majority of container ships are built to withstand rough waters. Before leaving the port and even when traveling during inclement weather, sea freight forwarders in the Philippines can easily control routes. Only during periodic port closures are they delayed.

Customs

Philippine customs are cited as one of the more challenging aspects of logistics competence.

The country is at a competitive disadvantage compared to other nations where electronic applications and single windows for customs exist. There is a distinct administrative burden of applying for separate import permits with various organizations. Keeping up with all the customs regulations changes could be challenging and time-consuming.

Some logistics firms specialize in or assist in navigating these rules. Additionally, several of them use automated procedures to ensure that all your paperwork is up-to-date and complete. This makes it easier for your shipments to pass through customs without problems, assuring prompt delivery and satisfied customers.

eCommerce Opportunities with the Philippine Shipping Industry

The Philippines is a popular market for growing online retailers and expanding international eCommerce marketplaces.

The Philippines is strategically positioned for easy trade with China, Vietnam, Japan, and many other major players in the global economy. It is a founding member of the World Trade Organization (WTO), the Association of Southeast Asian Nations (ASEAN), and the Asia-Pacific Economic Cooperation (APEC).

Despite the COVID-19 Pandemic, the Philippines boasts the following: 

• The 32nd-largest economy in the world by nominal GDP
• Asia’s 12th-largest economy
• ASEAN’s third-largest economy
• A predicted GDP of more than 433 billion USD in 2022

In 2023, the local eCommerce market is expected to generate US$16.91 billion in revenue.

Logistics and supply chain businesses may take advantage of more significant opportunities given by the expanding economic sector in the Philippines, notably in e-commerce, by embracing digitalization. 

If fully utilized, digital transformation can increase global revenue from digital logistics by 21.5% from 2022 to 2029. That could yield over USD 99.16 billion.

There is room for the Philippines logistics market to explore fully utilizing its digital opportunity. Many regulations, such as the “Digital Rise Program,” have already been established to expedite digital transformation. The sector should emphasize advancing digital skill development, accelerating digital adoption and innovation, and fostering digital trade prospects.

Both local and foreign businesses are represented in the Philippines’ highly fragmented logistics market. Among them are Nippon Express, W Express (DHL), 2Go Logistics, Royal Cargo, and Fastcargo Logistics. Construction of warehouses closer to the customers they serve is a prominent trend anticipated to fuel market expansion. This tactic is employed to meet the demand for express deliveries.

Additionally, most businesses will use cutting-edge technologies like drones, cloud computing, and automated robotics. These new technology implementations will intensify the logistical competitiveness in the nation.

Additionally, some cold chain operators are projected to grow their companies. They plan on constructing many new cold storage facilities to fulfill the rising demand for refrigerated storage. The goal is to enhance the Philippines’ cold storage sector, thereby increasing possible product imports. A new wave of technical developments is transforming the nation’s logistics industry. Though it may take years,  the organic expansion of logistics companies and the end users of such services depend on it.

Fortunately, the market is already there. The average Filipino uses social media sites actively for an astounding 10 hours every day, seven days a week. In 2022,  the country’s total number of active social media users in the country hit 78.5 million users. The Philippines Central Bank said 20.1% of financial transactions in 2020 were digital payments ($46.8 billion), up 61% from 2019. By 2023, the Central Bank hopes to bank 70% of adult Filipinos.

The Philippines is a feasible market to break into to establish your international eCommerce business. A large segment of its population is young and more technologically savvy, offering significant growth potential in its eCommerce environment.

While the Philippine shipping industry has unique challenges, steps are being taken to modernize and streamline it.  Working with the right shipping parts will substantially streamline your logistics and delivery processes. You can achieve seamless cross-border shipping to the Philippines by working with trustworthy and knowledgeable shipping partners at each stage. It can even work with just one partner who can handle every step.

ZhenHub works with globally-connected eCommerce fulfillment centers that bring your products closer to your customers. Our distribution network gives you a footprint in the Philippine shipping industry, giving you sustainable and trackable logistics options. Take the first step in expanding your market by signing up on our website.

The freight sector is predicting economic growth will slow down soon. 

Bank of America experts laid out several economic factors that point towards a recession. Freight rates, capacity, and inventory levels saw a slow decline similar to March 2020, when the world experienced global lockdowns.

Prices of big used rigs are slumping this year, with prices 20% cheaper than what they were last year in the same period. Supply chains are still in disarray, causing many global disruptions such as port congestion, product shortages, and several other logistics challenges hampering business operations.

All this has created a domino effect on already overburdened supply lines. FreightWaves CEO Craig Fuller, a top supply-chain news and data source, is wary of a coming freight recession. 

Fuller explains, “We think another sharp, painful downturn in the U.S. truckload market is imminent, and it could be as bad as 2019.”  

In 2019, there was an oversupply in trucking, which resulted in surging growth in the industry in the two previous years. Prices dropped sharply, causing many companies to go out of business. Demand for trucking has been uncharacteristically low, and customer sales were not as high as projected, mostly a side-effect of global shortages. 

What is a Freight Recession? 

A recession is a general economic decline in which trade and industrial activity are reduced, generally identified by a fall across two successive quarters of GDP. 

The freight industry is typically a small part of the overall economy but impacts larger economic sectors such as industrial and construction activity. It can lead to recessionary conditions across all industries because supply chain disruptions happen at every level—from production through distribution channels. For example, heavy machinery and components tied to the industrial and construction sectors can significantly affect freight volumes. There’s significant spending on education and health care but has little influence on freighting. Consumer spending generates a lot of freight activity but can also be affected by product sizes. Smaller products generate little freight demand, as more of them can fit into a single trailer. 

 Overall volume is one way to accurately measure real-time demand for freight, while seated truck availability represents the overall capacity to handle it. Truckloads are the largest domestic transport sector. It becomes a freight recession if the trucking experiences consecutive quarters of volume decline. Overcapacity is a recession’s most common manifestation as freight volumes, and tender rejections tend to be low during this period. 

Low tender rejection rates show that current contract rates are low enough to encourage acceptance of previously agreed-upon terms, which leads to lower prices during future negotiations. These market conditions make it difficult for truckload carriers; margins diminish,  and large portions of their fleet are idle.

We can measure the health of our freight market by looking at industrial production. A contraction in year-over-year growth for manufacturing typically coincides with declines in shipping volumes. Rail traffic statistics are another metric to measure market health. Exclude coal and grain shipments as they are affected by non-cyclical factors. These factors should provide a fairly accurate sample of the current freight economy. 

Signs that a Freight Recession Might Be Coming

The freight market has been volatile recently, with some experts warning of a looming recession. But should trucking be bracing for bad news? Or should it look forward to a possible future where things could finally turn around?

The drop in the spot market’s load-to-truck ratio can often signify reduced customer demand. But this may not always lead to a decline if long-term contracts for bigger carriers kick into high gear. 

However, the decline has caused some concern from analysts who are reaching out to carriers on how they would respond if demand continues to fall. This matter is on top of current issues such as struggling driver recruitment and higher labor, fuel, and equipment costs. 

“What will be interesting to see is how these companies can manage their cost structures with increasing costs and buying equipment while we see, potentially, a resetting of the market down,” said Jim Nicholson, senior vice president of operations at freight technology company Loadsmart.

1. Inflation and Lower Consumer Demand

Higher inflation and slowing growth have affected several markets, with the S&P 500 and Dow Jones Industrial Average dropping 4% and 3.6%, respectively. Many logistics markets felt the downturn, with several large shipping conglomerates such as FedEx and Old Dominion Freight Line experiencing drops in their overall value.

As fewer people are lining up to buy consumer goods in retail stores and online, logistics firms that are part of the network are moving fewer products. Businesses get constantly challenged on all fronts meaning sustainable growth is slow amidst a challenging economic environment.

2. Rising Prices of Trucks

During the COVID-19 pandemic, freight rates saw a huge boom due to massively increased demand and a reduced supply. This situation has encouraged many investors and new entrants to take the opportunity to fill in the gap by purchasing used trucks to generate profit. With a low entry barrier and flexible financing, many smaller logistics companies got their start by buying trucks. 

The supply of new trucks is still in a precarious predicament, given the computer-chip shortages affecting the automotive industry and several other supply chain disruptions. As more companies lined up at auctions for more trucks, what little supply there was, started to dry up, causing them to sell for nearly triple the price from the previous year. 

Unfortunately, this coincides with a softening demand for trucking, leading to an oversupply of trucks and plummeting freight rates. The result? Losses for many trucking companies.

3. Falling Freight Volumes

A recent Bank of America survey found that truckload demand has fallen 58% to a near-freight-recession level. The recent Cass Freight Index shows a noticeable drop in U.S. freight volumes from 2021’s growth, with the shipment components falling 0.5% year-over-year. 

The ongoing Russian-Ukraine conflict, rising inflation, and interest rates have slowed down freight travel even more. 

“After a nearly two-year cycle of surging freight volumes, the freight cycle has downshifted with a thud,” authors of the Cass Freight Index wrote in their April report. “The April data may include some indirect impact from lockdowns in China, but with container ship backlogs still off North American ports, the direct effects on finished goods imports seem more likely in the June/July timeframe.”

Comparisons and projections are challenging, with the global supply chain disruptions intensifying in the coming months.

Making your Business Ready for a Freight Recession

Despite the worrying news, many industry leaders are quick to point out that a freight recession may be overstated.  The data also doesn’t immediately lead to the collapse of an industry. Government Sources and the Logistics Managers Index (LMI) suggest that the freight market is simply returning to pre-COVID numbers Most of the regression is felt mainly by newer carriers who have paid more for their fleets. Compared to the impressive and robust expansion of 2021, this year is experiencing more moderate growth. 

Demand remains strong for larger shipping companies. CEO of the Old Dominion Freight Line, Greg C. Gannt, explains, 

“Sometimes in a downturn, it provides the best opportunity for you to go out and do some things in certain markets that are extremely difficult, and that may present an opportunity for us.  When those opportunities are there, you’ve got to strike and you’ve got to take advantage of them.”

Though the year-on-year numbers are down, many companies still report strong freight demand. The existing fleet and available drivers easily handle many assignments.  

The freight industry has always been prone to small and sudden shifts while experiencing booms and busts. The first quarter is almost always the slowest period for most trucking companies. Some industries still report strong demand, such as housing raw materials. Even if some numbers may be down, it depends on different industry segments and individual customers. 

Don’t wait for the recession to hit; start bracing for impact now. Proactively prepare your company for possible tough times and take a holistic approach to identify potential problems in your operations or process. Explore the possibility of digital innovation in your supply chain, and solidify existing relations with internal staff, clients, and partners. Understand current needs, monitor productivity, and secure a positive customer experience. Transparency and good communication can go a long way in building trust and ensuring that all shareholders are ready for a possible economic downturn. 

Intelligent outsourcing can help boost your bottom line, streamlining processes and giving leaders more oversight over operations. Unload critical tasks from your staff with third-party logistics (3PL). They can help you save on costs and speed up delivery times with greater reliability. ZhenHub offers powerful tools that improve eCommerce fulfillment and logistics. Get connected with a diverse distribution network of global warehousing partners, allowing your business to overcome logistics hurdles with cost-efficient and trackable shipping services. Sign-up on our website for free and get started with our all-in-one platform.

News headlines report more product shortages in stores and markets, and even essential commodities are getting more scarce. Learn why there are shortages and how it’s affecting customers and businesses.

• Notable Product Shortages in 2022
• Major Factors behind Product Shortages
• The Impact of Product Shortages

As the world slowly recovers from the effects of the COVID-19 pandemic, industries and manufacturers are finding it harder to meet ever-increasing global demands. Businesses have dealt with supply chain issues that resulted in product shortages since the start of the year.  They’ve adapted to current economic conditions, going to great lengths to stock local grocery stores and online sellers, support suppliers, and partners.

They’ve done these and more at a high cost.

Stocks take more time moving from one distribution center to another due to port congestion and shipping container shortages. Meanwhile, other businesses have struggled to keep up with rapid changes in demand. Shortages are becoming more commonplace now as products get more scarce and there is not enough workforce to move them. 

Supply chains have been stretched to their limits trying to get lead times on track and customer expectations realistic. Emergent solutions such as eCommerce and cloud-based computing have helped business leaders explore new ways to reach customers and streamline their processes. 

The world is starting to feel the effects of the supply chain crisis, and consumers are experiencing product shortages first-hand.

4 Notable Product Shortages in 2022

2022 has seen a slow return to a pre-pandemic life. More people are out and about, health restrictions are easing, and many activities such as concerts and sporting events have returned. Companies are figuring out a hybrid working scheme to allow employees to continue working at home and finding time to report to the office. 

During the start of the pandemic in 2020, household basics such as toilet paper, hand sanitizers, and disinfectants got scarce due to the incredible demand in response to the health dangers that COVID-19 posed. Nearly two years later, some items got expensive or harder to acquire.

1. Groceries and Food

Empty shelves are becoming common in groceries across North America and Europe. According to Morning Consult’s latest U.S. Supply Chains & Inflation report, over half (51%) of consumers surveyed in March 2022 reported experiencing product shortages of specific types of groceries and food, up from 43% in September 2021.

Unlike previous years, however, product shortages vary from different locations. One store may have some items in stock, while others may not. 

“It’s spotty, it’s not a widespread situation,” says Katie Denis, vice president of research for the Consumer Brands Association, which represents the consumer packaged goods industry, including companies like General Mills and Kellogg. “It’s not like at the beginning of the pandemic when people went out and cleared shelves to stockpile and panicked.”

Meat (especially beef and poultry), eggs, baby formula, canned goods, and paper goods are just some goods that got expensive or stocked out at some point.

2. Aluminum

One of the main reasons canned goods are harder to find in stores is the tight supply of aluminum, which is a major component in the manufacture of cans. Popular energy drink maker Monster Beverage found it difficult to keep up with the increased demand for their product. China’s efforts to reduce its carbon emission slowed down the production of aluminum and other energy-intensive metals.

Rising gas costs in Europe have also caused a slowdown in production, leading to a shrinking global inventory. Breweries, in particular, increased their demand for aluminum cans partly due to their cheaper cost to transport as compared to glass bottles. Cans are also perfect for storage at home, making them popular for the stay-at-home crowd.

3. Semiconductors

The demand for advanced computer microchips is higher than ever, meaning the semiconductor supply will remain tight. From high-tech cars to 5G-ready smartphones, semiconductors are vital to modern electronics. Semiconductors have a notoriously complicated production process that is difficult to speed up, leading to a huge backlog in many major producers. Companies have started implementing “strip-down” strategies to reduce their dependence on certain chips, meaning their designing products with fewer features to accommodate for low supply. 

4. Tampons

Stories of stocked-out feminine hygiene products in stores have gone viral on social media.  viral on social media, stressing many buyers in the U.S. 

Edgewell, a major personal hygiene producer, said that Covid-related staffing challenges in late 2021 and early 2022 contributed to supply issues. Major North American pharmacy chains such as CVS and Walgreens report stock-outs at several stores.

While tampons and other hygiene product inventory will likely improve, many retailers believe the shortage will last only a few weeks. Kotex, for instance, said they have plenty of stock.

3 Major Factors Behind Product Shortages

There are several reasons some goods are not filling up shelves and shopping carts: natural disasters, the spread of COVID-19, political unrest, and supply chain issues. 

CEO and founder Bindiya Vakil of Resilinc, a company that uses predictive analytics to help build and sustain effective supply chains, explains, “Unfortunately, the supply chain is still quite a mess in that it is still playing catch up: Supply can’t keep up with demand and we’re seeing more and more products going into constrained and delayed stages. Reduced labor and truck driver shortages are in play; fewer people working means a significant drop in production. Whether it’s problems at a packaging or processing facility, fewer truck drivers to get the food to the retailer, or not enough hands to stock shelves, ultimately, we’ll see the impact at the grocery store.”

The availability of these goods relies on three key components: raw materials, human labor, and logistics. If any of these break down, the entire supply chain suffers, leading to product shortages. 

1. Lack of Workers

There aren’t enough people making, moving, and selling the goods. Like the very goods they produce, there is a distinct shortage in skilled labor which has been caused by changing working conditions and low pay. The U.S. Labor Department reported a 5.5 million difference in job openings as there are workers. 

Fewer people working meant production wasn’t getting met. With workforce shortages in manufacturing factories, driving delivery routes, and stocking shelves, it makes sense to see even fewer products available for sale.

2. Russian-Ukraine Conflict

The Russia and Ukraine conflict is having a profound effect on global markets. It has disrupted global agricultural exports from Russia and Ukraine. These two countries are grain exporting powerhouses accounting for 24% of global wheat exports by trade value, 57% of sunflower seed oil exports, and 14% of corn from 2016 to 2020, according to data from UN Comtrade. They also supply 30% of the world’s wheat.

Blockades and economic sanctions from other countries have taxed an already burdened logistics system, making travel and transportation more difficult and expensive to move goods in, out, and around the region. 

What’s more, is that Europe is heavily dependent on Russia for natural gas and crude oil. Russia is a major exporter of essential commodities such as precious stones and metals, leaving many businesses and manufacturers without Tier 1 and 2 suppliers. It has led to a rapidly dwindling supply of raw materials for production.

3. Natural Disasters and Climate Change

Floods, heavy snowfall, typhoons, and fires have all caused major disruptions in areas that house many manufacturing factories or transportation hubs. While these events mostly cause short-term delays, these problems can become a long-running issue. The issue is how unpredictable, and sudden disasters can be, and often there is little people can do to change that. 

For example, the Texas power crisis caused by heavy winter storms shut down three major semiconductor factories while also closing major railroads, which are important routes for efficient supply chains. 

The Impact of Product Shortages

According to a report from Morning Consult, around 41% of U.S adults report that shortages significantly hindered their prospective purchases from all retail segments in March 2022. Delivery speeds are noticeably slower compared to the same period in previous years. 

The most pressing concern for consumers is the fear of inflation, with customers paying 8.5% more for goods this 2022 than last year. Yet as prices go up, demand is hardly affected as buyers are still willing to pay for items despite the more expensive price tags. 

Business and political leaders want to create more sustainable systems for workers by promoting safer workspaces, comprehensive education and technical skills training, and resilient infrastructure. Some regions even offer generous incentives to companies to encourage them to move and establish production factories to stimulate local economies and provide high-paying jobs.

For consumers, responsible shopping is key to managing product shortages. Retailers are managing inventories, and hoarding is a wasteful practice that may also do more harm than good. 

Business owners should set up risk management systems to deal with shortages and explore alternative sources of materials and goods. Investing in technology is a great way to streamline a supply chain and provide a better customer experience overall. By monitoring inventory levels and immediately connecting with suppliers, a business can forecast and adapt faster to sudden shifts and changes in the market due to unforeseen circumstances. 
ZhenHub offers robust logistics software solutions that power your business to do more by accelerating growth through advanced technology. Control multiple fulfillment operations from a single dashboard and receive real-time data on your current inventory. It’s easy to get started when you sign-up for now!.

Historically, the U.S. has been the leader in the development and sales of semiconductors. However, the majority of manufacturing is based in Asia. According to the Semiconductor Industry Association, Taiwan and Korea already account for 83% of global processor chip production and 70% of memory chip output.

Because of health and safety concerns over COVID-19, Asian countries imposed strict lockdown measures resulting in factories not operating at total capacity. This unfortunate effect, in turn, created a huge bottleneck in the global supply chain. 

Experts initially forecasted the semiconductor shortage to last until 2023, but Intel CEO Pat Gelsinger expects it to last until 2024. 

A key reason for this is the lack of availability of manufacturing tools, which cannot support the higher levels of production that are supposed to meet increased demand.  

Gelsinger explains, “That’s part of the reason that we believe the overall semiconductor shortage will now drift into 2024, from our earlier estimates in 2023, just because the shortages have now hit equipment and some of those factory ramps will be more challenged,”

Learn more about the semiconductor supply chain’s significant challenges and what is in store for businesses moving forward.

A Look Into Semiconductor Supply Chain Issues

Semiconductor shortages are nothing new. However, as with many industries, it was particularly hit hard because of the COVID-19 pandemic. As the world shut down in 2020 and the pandemic caused lockdowns, companies canceled orders, and demand dropped. Many factories based in Asia closed, and production lines ground to a halt. So the manufacturing industry faced a difficult situation: how can they continue their operations safely, and what can they do with significantly reduced demand.

The automotive industry, which makes up a significant chunk of the semiconductor customer base, saw many car companies canceling their orders. Despite this, they used their inventory to make up for losses and build what they could with their materials. Driving utilization levels were at an all-time low, meaning there wasn’t a significant demand for consumer vehicles.

Much of the workforce transitioned to a work-from-home setup, requiring PCs, laptops,  tablets, and even backup computing devices to help them do their work properly. 

Most consumers were stuck at home, so they had to keep themselves entertained. Thus the demand for entertainment devices such as gaming consoles and Smart TVs also grew.

Come Q3 of 2020, the pandemic caused a global domino effect and created a perfect storm of shortage when automotive production started ramping up again. Semiconductor availability was limited and further strained due to increased demand for high-end automobiles that became more affordable due to lower interest rates. These modern cars had several automation features which required microchips. 

Manufacturing struggled to keep up with demand, as many major players such as ST, Infineon, ON, and NXP had cut down on production. A delay in the restart and delivery caused significant delays. Other factories had the misfortune of being hit with calamities and onsite hazards. A fire at a Renanas manufacturing plant cost six weeks of production, and there was a water crisis in Taiwan.

The fundamental structure of the semiconductor market share has been both a blessing and a curse. No company owns more than a 15% share of the global market. Because of this fragmented nature, companies could specialize and provide specific parts for individual industries. 

While this particular manufacturing attribute helped alleviate some of the production issues,  some products will be missing. Manufacturers couldn’t ship out products due to an incomplete parts list. While core technologies will be available, no single company has the size or means to provide all the materials for a supply chain system. 

Semiconductor supply chains have been designed to be extra efficient using lean manufacturing but at the cost of being vulnerable to sudden changes in the market. The industry is making slow steps towards consolidation, but supplier interdependence is still necessary.  Microcontroller chips take months to produce, effectively increasing production times for cars, smartphones, and more. Speeding up this manufacturing process is next to impossible due to the physical limits of handling silicon. 

Geopolitics has also played a role in contributing to the semiconductor supply chain issues. The Russia-Ukraine conflict has left manufacturers without raw materials to produce chips. Ukraine supplies 25 to 35% of the world’s purified neon gas, and Russia is one of the biggest producers of palladium, a rare metal used for semiconductors. The war has also delayed logistics through the air due to increased transportation costs.

Former U.S. President Donald Trump regulated sales of American-made chips to Chinese firms such as Huawei, ZTE, and more. At the same time, Chinese chip makers were blocklisted, leaving American businesses without another source of semiconductors.

Consumers are learning this the hard way as chips are not commodities, despite the semiconductor industries’ best efforts to ramp up production and capacity by increasing the number of factories. 

The Impact of the Semiconductor Supply Chain Shortage

A Goldman-Sachs report claims that around 169 industries were hit hardest by the semiconductor shortage, including automotive and consumer electronics..

The average modern car requires up to 1,400 to 1,500 chips, with more advanced models needing up to 3,000 to provide high-tech features.

Ford, one of the largest American car manufacturers, reported a US$3.1 billion loss due to the limited sales of their popular SUVs and pickup trucks in North America. A substantial investment in major chip maker Rivian also contributed to the loss.

Chip shortages have led to several factory closures, leading to a drop in the number of vehicles sold during Q1 of 2022 compared to the same period last year.

Desktop computers and graphics cards (GPUs) were wildly in demand during the early days of the pandemic, and continue to do so. The global CPU giants Intel and AMD have struggled to provide customers with enough stocks of their latest products. Top-of-the-line computer graphics cards were in high demand due to the rise in crypto-currency farming. It did not help that AMD and Nvidia, leading manufacturers of GPUs, released the latest versions of their flagship models to critical acclaim. Many of these components were incredibly difficult to buy, as scalpers employed internet bots to buy online stock immediately. These unscrupulous merchants then sold the hoarded items for exorbitant markups of up to 300% compared to their street prices.

The same problems would plague the video game console industry as people looked to entertain themselves at home. The lack of chips meant that Microsoft and Sony could not match the production of their latest gaming consoles to the record-breaking demand. These companies found themselves unable to create more machines leaving buyers scrambling to purchase any available units.

Smartphone companies have delayed the launches of several new phones, with the more basic models greatly affected by the microchip shortage. The lack of materials has hampered 5G network implementation in supporting the new infrastructure.

The Future of The Semiconductor Supply Chain Crisis

To adjust to the “new normal” of semiconductor shortages, companies have taken it upon themselves to solve the problem. One way is through more means of production. Intel has invested up to $100 billion to open up new plants in Ohio, and Samsung also plans on opening a $17 billion factory in Texas.

2022 is still largely seen as a year of recovery, as COVID-19 cases are decreasing thanks to global efforts to distribute the vaccine. Companies must consider their needs based on several time frames. Planning for long-term resiliency is also a must. Solutions such as diversifying procurement from Tier 1 providers and OEMs, robust technological road maps, and improved inventory tracking and demand forecasting all play a part in helping a business adapt to shortages. 

Another factor to consider is designing products to use fewer chips by cutting out high-end features. Visibility and strong supplier relationships can provide businesses with a safety cushion to weather the semiconductor supply chain crisis.

ZhenHub offers a complete suite of logistics software solutions. As your partners, we can coordinate with a global network of distribution partners to reduce shipping and storage costs. Experience increased oversight on inventory and fulfillment operations from a single dashboard. All these features and more await when you sign up at our website.

These steel boxes have served as the backbone of supply chains around the world since the 1950s. From the 1980s onward, shipping containers were a cheaper and faster solution to bridging foreign markets together. Containers are crucial for efficient trade, handling large volumes of goods such as clothing, heavy equipment, raw materials,  and so much more.

However, businesses and governments are now at a loss on properly managing hundreds of ships stranded and stuck in port limbo due to various issues caused by the COVID-19 pandemic and the global supply chain crisis. 

We will discuss the chain of events that have caused this unusual scarcity of shipping containers and what the industry is doing to solve it.     

The Origins of the Shipping Container Shortage

Worldwide lockdowns caused by the COVID-19 pandemic in 2020 placed restrictions on movement, leading to drastic changes in consumer consumption.  The demand for goods such as home office supplies, electronics, and medical supplies grew exponentially. Many manufacturing hubs for these items shut down due to their location in China and Asia, which was ground zero for the pandemic. 

Factories suspended operations, and global supply could not meet the demand. Ports did not have enough staff operating their stations, as COVID-19 outbreaks forced workers to go into isolation. These unforeseen complications caused numerous delays in unloading goods, the first signs of the current supply chain crisis.

Shipping containers typically follow a set route, called a string, with particular activities done at every stop. These containers often change hands and are handled by several forwarders. These will get loaded onto different ships for weeks and months, often carrying merchandise from various businesses. Containers can be “recycled” in the sense that once they have finished their string, they get sent back to their port of origin. It’ll be filled with items again and then begin its route anew.

Before the pandemic hit, it wouldn’t be uncommon for ships to sail back to Asia with nearly their entire cargo of containers being empty, ready for reuse. That all changed in 2020. These same ships would only be carrying half of their usual capacity, with many of the containers stuck at their terminals.

Fast-forward to the end of 2020. Factories and manufacturers have begun to open as governments try to jumpstart their economies and avoid further costly losses. Vaccines also start to circulate, strict health protocols get implemented, and more people go to work onsite. 

As lockdown measures relax, marine traffic picks up. However, the time it takes for container ships to finish their routes is increased from 60 days, stretching to well over 100 days due to capacity cuts in Europe and the US. 

This limited capacity meant that logistics companies no longer picked up containers at shipping terminals and storage facilities. The easing of lockdown restrictions varies among different countries, resulting in an imbalance of containers, with Asian markets lacking supply and European or North American ports swamped with empty boxes.

The Shipping Container Shortage: Where Are We Now?

Experts were optimistic that the shortage would ease up going into 2022 with the uptick in container production. It didn’t pan out as production only saw a marginal growth of less than 7% in 2021.

Containers are still stuck inland, with not enough ships to move them around. John Fossey, head of container equipment and leasing research for London-based Drewry, said that there are more than enough containers to handle global trading volumes. It is a different story in practice. He explained that availability in several parts of the world has become incredibly tight because many containers are stuck in the wrong place.

Janet Porter, editorial board chair of Lloyd’s List, a London-based maritime information service, explains, “The reason there’s a shortage is that a lot of them are stuck on ships that are waiting outside ports because of this supply chain crisis. Those containers can’t be moved back to where they’re needed.” 

Several other factors define the shipping container shortage in 2022:

• Inflated Shipping Costs
  Container shipping rates have steadily risen in late 2021, with prices being the highest in four years. Freight rates, including surcharges from the East have more than doubled. Handling costs for a 40-foot container can reach highs of US$20,000, which is 20 times more expensive than the reverse trip. 
  
  These surges have been attributed to labor losses, too much demand, dwindling supply, and ever-changing COVID-19 restrictions. 
  
  The well-documented blockage of the Suez Canal in March 2021 forced ships to take much longer alternate routes, detours that have added hundreds and thousands in fuel and other costs. 

• Port Congestion
  Companies aren’t unloading shipping containers fast enough to be sent back to their point of origin. This problem is most evident in US West Coast ports in Los Angeles and Long Beach. As dock workers struggle to process and unload products, many ships get forced to anchor away from shore, idling as they wait for their turn. 
  
  It’s gotten so bad that the US Government has had to step in by suggesting the ports maintain 24/7 operation. 
  
  There is a staggering difference between containers received and those exported for reuse. Due to the lack of storage for incoming goods and the rising shipping cost, nearly 60 out of every 100 containers continue to accumulate at major trading hubs, not generating any income. 

• Labor Shortages
  According to Sea-Intelligence, a firm that provides market intelligence on global supply chain issues, many dockers were infected during the COVID-19 surges late last year and at the start of 2022. It hampered productivity as fewer teams were left to handle a massive inventory backlog. 
  
  China’s policy of mandatory seven-week quarantine for returning cargo crews and a two-week waiting period for vessels have forced many ships to reroute, causing additional delays and incurring extra costs. As a large majority of shipping container production comes from China, it has severely disrupted the supply chain to other countries. 
  
  Sea shipping continues to be the dominant mode of transportation for goods, and experts believe this crisis will continue into the foreseeable future. The good news is that businesses can adopt strategies and best practices to help navigate the shortage.

Solutions for the Shipping Container Shortage

Container makers have upped their production numbers to combat the shortage, and logistics companies have used record profits to expand their businesses. While conservative, analysts from A.P. Moller-Maersk A/S, believe that ship backlogs will begin to ease up in the second half of 2022.

Chief Executive Officer Soren Skou explains, “We are guiding in an environment where we are coming out of a pandemic, and we don’t have much experience with that, to be honest. So we are saying we expect quite a strong first half of 2022, and then we expect what we call a normalization early in the second half.”

One such example is Hapag-Lloyd investing technologies to modernize their fleet. But in the meantime, they’ve committed themselves to reroute their resources to where they are needed the most. The 5th largest shipping company has taken to repurposing refrigerated boxes  to meet the demands of shipping container shortage.

An online business can consider alternatives to the standard steel boxes; tricons, bicons, and quadcons which are smaller than your standard containers. Their smaller sizes can be more cost-efficient, especially when fulfilling single orders from customers. 

Cutting down on logistics costs can go a long way, primarily when you work with a third-party logistics (3PL) partner. A shorter supply chain leads to reduced shipping costs and faster turnaround times. 3PLs will also have access to global networks allowing for alternative sourcing and shipping routes. They will also have partnerships with trusted couriers, allowing for bulk discounts as well as multiple storage options for your items.

Digital technology such as supply chain management software offers valuable data and analytics. Utilizing tech allows retailers to forecast and adjust their schedules based on projected consumer demand and transparency regarding current inventory. The added oversight helps identify key inefficiencies in a process that can be dealt with before it causes any delays for a business. Planning ahead of time helps circumvent the long waiting times, and ordering your goods in advance will help manage customer expectations.

A.I. programs are possible ways to run simulations for new processes without the hassle of delays and possible human error. 

MeetKai CEO James Kaplan says, “The nice thing about AI, and just in general about any type of machine learning, is that it’s very easy to test historically. We can go back in time and look at the price to ship a unit across the sea from any route that you want to talk about. We can build a model that predicts that and see how well it’s actually performing.”

The pandemic won’t end anytime soon, so it’s reasonable to assume that the shipping container shortage will continue for the foreseeable future. These containers will remain a precious commodity for manufacturers and businesses. Therefore it will be crucial to keep tabs on any news and events related to the crisis to make timely decisions that will minimize the impact on operations.

ZhenHub has access to a global network of fulfillment partners and integrations to many online eCommerce markets. We offer cost-efficient and high-tech software solutions from complex to simple logistics processes. Sign-up for free and experience worry-free global market expansion.

2021 brought along a different set of challenges. As eCommerce grew and more people shopped online, warehouses and shipping ports filled themselves with goods, causing significant delays due to congestion. Moreover, a shortage of semiconductor chips hit automotive makers and the electronics industry, especially hard since these chips serve as key material for their production.

To summarize the situation, Damien Bruckard, deputy director of trade and investment at the International Chamber of Commerce in Paris, says: “The collapse and subsequent surge in consumer demand during the pandemic has led to significant shortages of manufacturing components, order backlogs, delivery delays and a spike in transportation costs and consumer prices.”

What is the state of the supply chain crisis in 2022? This article will outline some of the major causes of the problems in supply chains today and provide insights to avoid delays. 

What Caused the Global Supply Chain Crisis?

In early 2020, many manufacturers put their operations on hold as a precaution against COVID-19. Much of the world still didn’t understand the nature and effects of the virus at the time.As a result, governments temporarily asked businesses to close in the interest of public safety. Here are some major events that contributed to the current crisis:

• As the COVID-19 virus infections exploded in China, many major manufacturing firms had to lock down a majority of their workforce. This shutdown of operations heavily affected the production of medicine, consumer goods, and electronics.
  
• Work-from-home arrangements and lockdowns increased demand for electronics, medical equipment, appliances, and building materials. Additionally, people were concerned about preparing themselves for the long haul against the virus.
  
• The dominance of the “lean manufacturing” model led to a chain reaction that left warehouses unable to keep up with a sudden demand for products.

Businesses believed that consumers would be more conservative with their spending, given much of the world had been put on strict lockdowns and many companies choosing to put their operations on hold. But as people received financial aid in the form of stimulus packages, and added savings from staying at home, they turned to online shopping instead. 2020 retail holiday sales actually grew by 8.3% in the U.S. despite the pandemic. 

Lean manufacturing can be advantageous for many companies, focusing on minimizing waste leading to cost-efficiency and reduced lead times. However, market demands skyrocketed when the COVID-19 pandemic began. The lean approach wasn’t enough. It relied on highly accurate forecasting to adjust the shipping dates to deliver the right items when needed. This foresight prevents stocks and materials from spending extended time in storage.

The sudden changes in demand exposed flaws in many logistics operations. For example, businesses could not immediately acquire large stock due to staff shortages in warehouses and manufacturing. This delay would later cascade into logjams at major trading hubs and port cities, with massive backlogs in crowded shipyards.

The Current State of the Global Supply Chain Crisis

Businesses initially have tried to deal with disruptions to their supply chain by spending more to hire private container ships and stockpiling goods. However, these are more temporary solutions to the problem. As a result, other retailers have looked to overhaul how they approach logistics, prioritizing security.

Shipping companies saw immense growth in 2021, with the cost of a 40ft container increasing from $1,331 on average at the end of February 2020 to a peak of $11,109 by mid-September 2021.

The soaring shipping cost has highlighted the need to shorten supply chains and look for alternative ways to get products out to consumers.

Lisa Anderson, president of supply chain consultancy LMA Consulting Group, says: “[The rocketing container costs are] increasing the prices of goods because companies can’t just absorb these prices, and they are passing them on. It is causing this inflation that will continue as long as shipping prices are high.”

The global political and economic landscape has also affected the supply chain issues. Europe, in particular, has seen added cross-border checks and red tape due to Brexit. The ongoing Ukraine-Russia War is a significant factor in rising goods and transportation fees costs and continues to endanger many lives.

A severe shortage of semiconductors and chips has crippled the automotive and electronics industries as well. This shortage has affected the production of cars, coffee machines, computer components, and many more. As demand for items in these categories grew, production could not keep up due to a depleted supply. As a result, other manufacturers have resorted to hoarding chips, which has not helped the situation. 

Staff shortages caused by the pandemic have also defined the current supply chain crisis. Lockdowns and layoffs have resulted in smaller workforces and a need for skilled workers. As a result, skilled laborers have moved away from city centers into rural areas— making hiring and recruitment even more challenging.

eCommerce has shifted the way brands fulfill their orders. Traditionally, items are sent from the manufacturer out to retailers, whereas now the norm is to ship directly to the buyer. Warehouses are stocked to the brim to keep up with demand, especially in large metropolitan areas with a denser population of buyers. This lack of storage space has resulted in ships in limbo, floating offshore for days or weeks, waiting for an opportunity to offload. These problems, coupled with smaller workforces to unload and transport all these items, aggravated the situation.

Steve Dowse, senior vice president, and general manager for global solutions at FourKites explains, “Those systemic problems in the supply chains, this has been building for years. The pandemic has really just highlighted the fragility of our supply chains.”

Strengthening and Streamlining your Supply Chain

The supply chain crisis has forced businesses and retailers the way they approach logistics. The good news is that technology has provided smart solutions in making your supply chain agile, resistant to sudden changes and demand, and scalable. 

A.I, technology, automation, and logistics management are some of the critical solutions to keep up with global demands. 

Sridhar Tayur, professor of operations management at Carnegie Mellon University’s Tepper School of Business, said the future of the crisis depends on these 4 Ps: Product, Prices, People, and Politics.

• “Product availability will continue to be difficult, especially in semiconductors and in items that require them as components.”
  
• “Prices of supplies will continue to be high, and may even go higher in some raw materials, and companies will likely have to pass some of these onto their consumers. Inflation is here to stay for a bit and is not transitory. Wages may have to be higher.”
  
• “People (labor) shortage, due to new (and better) opportunities absorbing existing talent as well as [a] shortage of appropriate STEM skilled ones will continue to be an issue.” 
  
• “Political decisions related to mandates, inflation, multi-national trade policies, and immigration (both high skill and low skill) will have a sizable impact. Companies should be alert to these moving pieces as well as actively lobbying to gain the advantage.”

Businesses must upgrade to the latest technology solutions to power their supply chain management. For example, digital warehousing provides valuable data and insights into shopping trends and customer data, making you more flexible when demand is unpredictable. 

In addition, a streamlined supply chain has enhanced visibility and transparency, allowing you to identify weak links in your process. This shortened chain is ideal for small businesses to build customer loyalty with shorter lead times and accurate inventory reporting. It also ensures that items are always in stock and available when shoppers browse online. 

Investing in the right technology and software can also help empower your staff. For example, while logistics management software will need additional expenses for training and set-up, this will ultimately help reduce errors and person-hours through automation. What’s more, upgrading the skills of your staff will go a long way to making processes more efficient and reliable. Initiatives like these also help improve staff morale by showing you are committed to their growth as employees.

Managing data will also help business leaders make more informed decisions than before. A supply chain crisis 2022 roadmap is easier to visualize when you have a clear overview of all the small pieces that make up your chain. It can also provide  alternatives to ensure your goods are constantly moving and getting to customers reliably. Understanding trends will help you prioritize urgent customer needs, and historical data can shape demand forecasts.

Looking into 3rd party logistics (3PLs) can significantly reduce your operational costs. They also offer flexibility in fulfillment, using an extensive network of warehouses and fulfillment partners. 3PLs allow your businesses to reach new markets without relying on a single source. In addition, diversifying supplier sources makes a supply chain more resilient to disruption.

Stick to your specialty as a business leader, and let the logistics experts handle the movement of your goods from factory to consumers. The supply chain crisis isn’t going to end soon, but developments in technology give businesses a fighting chance.

ZhenHub offers a full suite of advanced logistics software solutions. From multi-channel fulfillment to reliable warehousing and inventory management, we have services that cater to businesses of any scale. So take a step towards making your supply chain more agile when you sign up at our website for free.

But before February 2022 could end, Russia invaded Ukraine, bringing the world to the brink of World War 3 and the beginning of a global economic meltdown. Russia was meted with economic sanctions, sending the Ruble crashing but upending global gas supplies. 

Now, the Ukraine Russian War further aggravated global logistics. The conflict has disrupted supply chains and left many companies struggling to get their products to the market. In addition, this invasion, or as Russia calls it, “a special military operation,” has led to increased costs and a decrease in revenue for many businesses. This article discusses the war’s impact on global logistics and how companies can adapt to these changes.

A Brief Breakdown of the Ukraine Russian Conflict

To better understand the global logistics issues we face, we must first understand how and why this conflict occurred. 

Ukraine and Russia share a deep history and culture. And their respective destinies have been intertwined with each other for hundreds of years. Since the dissolution of the Soviet Union in 1991, Ukraine has sought to distance itself from its communist neighbors and appeal to the Western Powers, the United States, and The North Atlantic Treaty Organization (NATO). Russia’s Vladimir Putin strongly rejects this move, reasoning that Ukraine is, and always has been, a part of Russia. Reunification is now one of the key reasons Russia is waging this war on Ukraine. Russia wants to bring the former Soviet state to heal and stop it from cozying up to western powers. 

In response to this, Putin laid out a set of demands to ensure his country’s security. These demands guarantee that Ukraine will never become a part of NATO and the intergovernmental military alliance removes its presence in Central and Eastern Europe. However, these demands were swiftly rejected by the US-led NATO. 

On Feb. 24, Vladimir Putin announced that his nation would perform a “special military operation” in Ukraine. Russian convoys made their way to Kyiv, Ukraine’s capital city, and rocket attacks hit residential areas and industrial zones. 

So far, Ukraine has put up a valiant effort of resistance and received military and humanitarian aid from its neighbor states and countries worldwide. Moreover, president Volodymyr Zelenskyy has been an inspiring figure to his compatriots and outside observers. 

Russia and Ukraine held peace talks in Belarus, a country known as a staunch supporter of Russia, but negotiations went nowhere. 

Foreign powers have largely condemned the hostile invasion of Russia, swiftly imposing heavy economic sanctions on the aggressor. But, while the world waits and watches the Ukraine Russian War in Eastern Europe unfold, a global logistics crisis is coming to the forefront.

How the Ukraine Russian War Affects Global Markets

Both Russia and Ukraine are significant players in providing raw materials and resources to countries and businesses worldwide. From smartphones to jet planes, many industries rely heavily on these two countries. 

Gartner analysts Koray Köse and Sam New foresee critical material shortages, material cost increases, demand volatility, logistics issues, capacity constraints, and cybersecurity breaches as the top concerns of the escalating conflict of the Ukraine Russian war.

“We expect severe shortages of hydrocarbons, critical minerals, metals, and energy. Prices for those items will likely spike, thanks to both the shortages and behaviors such as irrational buying and protectionism. This will, in turn, impact manufacturing operations up and downstream as much as raw material mining.”

Russia is considered the world’s third-largest oil producer. As Russia got hit with economic sanctions, it increased transportation costs in Eastern Europe and other regions worldwide. Consequently, the United States’ dependency on imports has made Russia its second most prominent source of foreign oil. In addition, energy prices have been soaring since last year due to the political tension in the area.

Complex industries such as automotive and high-tech electronics have seen their supply change drastically due to shortages of crucial rare earth materials such as palladium, aluminum, titanium, and steel. The lack of supply affects the current global computer chip shortage, making semiconductors (a product that usually requires palladium) even more challenging to manufacture. It is worth noting that both Russia and Ukraine are among the top copper and steel producers globally.

Even the food industry may take a significant hit if the Ukraine Russian war continues well into the spring and summer, as both countries are bulk sunflower oil producers. In addition, the lack of an abundant wheat harvest could spell disaster for the businesses that produce packaged foods and bread.

Christopher F. Graham, a partner at White and Williams, a law firm headquartered in Philadelphia, says, “The war just makes the worldwide situation for commodities more dire.”

The Ukraine Russian war also raises the issue of security and safety for transportation. Multinational shipping conglomerates like Maersk have temporarily suspended all shipments to and from Russia, except for essentials such as food and medicine. As a key city that functions as a vital bridge to Europe and Asia, canceled flights and trips will further delay already strained supply chains.

Lesser flights mean that planes will now have to seek alternate routes, which entail longer wait times and more fuel spent – a significant problem with the continued rise of oil and gas. Cargo planes take in fewer loads to maximize fuel efficiency and total range as a simple workaround. Now, flight networks have fewer trade routes in and out of Europe and Asia. 

However, John Grant, a senior aviation consultant for the OAG, remains optimistic about the long-term future of shipping planes. He comments that cargo carriers are nimble, “They can move with demand, so I suspect there will be limited immediate impact.”

We’re starting to see how a major global power hit with sanctions can affect supply chains and cause logistics issues for markets all over. For example, Western governments have effectively cut off Russian banks from moving money in and out of the country. This decision puts a stop to international trading and transactions.

President of the European Commission, Ursula von der Leyen, maintains that “Cutting banks off will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports,”

Looking at the short-term effects, manufacturers can expect to experience a disruption in the supply of raw materials. While the issue is ongoing, companies may hear from their suppliers that they have low to zero inventory because they outsource their goods from Ukraine and Russia.

Preparing Your Business for a Logistics Crisis

Flexibility and visibility. Quickly adjusting to sudden disruptions to your supply chain and diversified sourcing are key points to consider to overcome logistics challenges. 

Drawing up a detailed response plan is a good start. Managing customer demand during a shortage is key to maintaining a positive brand image. Contingency plans can also help you evaluate priorities when supplies are short.

According to Gartner analysts, “In the long-term, supply chain leaders must increase resilience by balancing investments in dedicated teams, processes, and technologies that will enable their organizations to implement end-to-end risk management.”

Searching for alternative sources for raw materials helps keep a business more resilient. For example, in response to the possible shortage of neon gas and palladium, Intel says it won’t affect them much since they have the flexibility to source their parts elsewhere.

Taiwanese and Malaysian chipmakers have already stockpiled alternative materials from other countries such as the US and Japan while reducing their dependence on palladium. This diversification has helped them mitigate slowdown from region-specific shortages.

It’s essential to map out your supply chain so you clearly understand where your suppliers source their materials from, as well as current inventory. The added insight helps with negotiations and also fosters consumer trust. Being aware of every movement in the supply chain helps keep you alert of any changes.

Having better visibility gives you a better overview of which outcomes are more likely to happen. Accurately predicting possible crucial roadblocks offers you the opportunity to anticipate and have more time to react accordingly. 

The Ukraine Russian war could become a long-term crisis. Now’s the time to reevaluate your company’s processes and discover how to make your systems efficient and resilient to respond to future challenges. Contact ZhenHub and or request a free quote to see the different ways our company can help your business adapt and improve with ever-changing supply chain demands.

This article will explain why you need to know about port congestion in 2022, and the best practices retailers can take to mitigate its effects. 

Port Congestion: What You Need to Know

Supply chain issues have been an ongoing problem for years. Global ports were struggling to keep up with the influx of orders even before the pandemic. COVID-19 brought it out to the fore and into the international market spotlight.

2020 saw the perfect storm. Between shutdowns and labor shortages, as well as the increase of eCommerce activity, it isn’t difficult to see how the global supply chain was bound to struggle through the pandemic. After two years, experts agree that there isn’t an end in sight:

“Port congestion is still very much with us. Not just at one or two ports. And not just on the West Coast.  Of the nation’s ten busiest ports by volume, it is estimated that at least seven face congestion regularly.  The causes are varied and complex — labor disruptions, cargo surges from big ships, infrastructure needs, marine terminal productivity, and equipment shortages, among other reasons. 

The result is chronic gridlock at many ports. Ships are stranded offshore for days, even weeks, waiting to unload. Containers are buried in enormous stacks in clogged terminal yards. Trucks wait in line for hours (up to eight or nine hours in some cases) to pick up a single container. And customers throughout the country experience shipment delays lasting weeks. The congestion and bottlenecks reverberate throughout the supply chain, becoming a significant trade barrier for both exports and imports with a corresponding negative impact on the economy,” read a part of the letter from the National Customs Brokers and Forwarders Association of America to the Congress. 

But the question on everyone’s mind is when will the situation ease and the problems abate. Unfortunately, there seems to be no end in sight. Retailers would still need to deal with congestions and price hikes.  

“It’s unlikely to happen in 2022. My crystal ball gets murky further out,” said Phil Levy, chief economist at Flexport, a freight forwarding company based in San Francisco.

Similarly, Aaron Alpeter, founder of Izba Consulting, a supply chain consulting, outsourcing, and technology firm, believes that companies will spend more resources for restructuring. It won’t be until 2023 and beyond before we see a more stable situation: 

“There’s a lot of fundamental restructuring going on as a result of the pandemic-induced demand shifts and geopolitics that we are probably 12 to 18 months away from being in a new steady-state,”

The Global Supply Chain Crisis

As mentioned earlier, port congestions are mere symptoms of a bigger problem. Most of the difficulties got catalyzed by COVID-19. However, in its wake lies the incredibly challenging global supply chain crisis issue. 

The global supply chain is a complex system, and so is the current crisis. The pandemic abruptly shifted consumer behaviors. Demand for certain products dried up while other sectors surged. Manufacturers, carriers, logistics providers, and retailers struggled to keep up with the ever-changing needs of the market:

“The supply chains were discombobulated. Shipping capacity was quickly exhausted at the start of the pandemic because everyone planned for a big decline in demand but in fact there was a surge because people wanted to buy things. Then the supply side was hit hard with ports, warehouses and truck companies all short of workers. But you can’t flick a switch and get new capacity back on. New ships are not ready until 2023. Shipping supply should normalize within a year but does the economy normalize?” explained Roy Cummins, chief executive of the Port of Brisbane in Australia.

For most businesses, recovering from this crisis would take years. However, Robert Swinney, operations professor of the Fuqua School of Business, believes the most operations should focus on developing resiliency strategies moving forward:

“Companies need to reevaluate their disruption-mitigation strategies and be prepared to invest more in resilience,” he said. “In the near term, I expect companies to exhibit renewed vigor in applying resilience measures including sourcing from multiple suppliers in diverse locations, having some excess or backup capacity that can be brought online quickly, and holding inventory as safety stock. And while people often look to inventory first, this is not the only solution. It’s one part of a portfolio of solutions, and it needs to be used carefully and selectively in concert with other strategies.”

How To Cope with the Rising Logistics Costs 

It can be difficult for small and medium online retailers how far-ranging the impacts are.  However, carriers are already hiking their prices. For instance,USPS increased its rates earlier than ever before.

At the end of the day, shipping costs are still the number one expense most eCommerce retailers need to keep down to maintain a smooth operation. Reducing this expense entails getting to know every process of transportation:

• Be Mindful of Dimensions

Reducing international shipping costs in 2022 starts with product manufacturing. At the onset of production, it is essential to keep track of the inventories’ dimensions. In addition, make sure that the items are easy to pack and stackable to significantly decrease the costs of shipping inventory from the supplier to the warehouse. 

• Understand the Destination

Different destinations have various documentary requirements – each with a corresponding cost. Therefore, it’s crucial for those new to international shipping to know these costs before entering new territory. It’s best to start small, understand international shipping better, and expand accordingly. 

• Negotiate with Carriers

Carriers provide a discounted rate for bulk shipping orders. Retailers must vet their potential carrier firms before doing business with them.  Take the time to negotiate with the shipping companies to get the best prices. It may take a lot of effort, emails, and phone calls, but the diligence is well worth it. 

• Work with a Third-Party Logistics Partner

Working with a reputable third-party logistics company is the best recourse for those who don’t have time to vet carriers and process international documents. In addition, 3PL providers can ease international shipping obligations. They can take on the entire order fulfillment process from shipping inventory to delivering overseas orders at a discounted price per order. 

Learn more about international shipping here. 

The world is facing plenty of uncertainties today. The effects of port congestions and the overall global supply chain crisis are bound to affect your retail operation. It’s imperative that you’re ready for future changes. You’ll need to partner with logistics experts that can help you at every turn. 

We at ZhenHub have decades of combined 3PL experience. We are supply chain and logistics experts, and we can help you navigate through these trying times. Give us a call today or request a free quote to learn more about how we can take your business to the next level. 

Every year, carriers, including the US Postal System, hike their rates to account for several inflation factors. 2022 is no different. They previously announced the USPS rate changes, which they imposed last January 9. In this article, you’ll learn all about the changes and their impact.

USPS Rate Changes: A 2022 Snapshot

In November last year, the USPS filed a price change request to the Postal Regulatory Commission. The notice aimed to enact the changes by January 9, 2022. As mentioned earlier, the Postal Service announces rate increases each year. However, the USPS rate changes were implemented earlier this year than the previous ones. 

In the press release, the USPS explains that the changes are part of a decade long plan to revive the operation and recoup projected operating losses:

“With full implementation, the Postal Service’s 10-year Delivering For America plan is designed to reverse a projected $160 billion in operating losses over the next 10 years. The Plan’s growth and efficiency initiatives, including the proposed pricing changes, together with necessary legislation, should allow the Postal Service to make investments totaling approximately $40 billion over the next 10 years to modernize and improve our infrastructure to become more efficient and service responsive.”

Aside from the hike, the request also detailed two new products’ inclusion in the USPS roster. The products, Plus One and Connect Local Mail, target same-day deliveries for local communities. 

USPS Rate Changes 

As mentioned earlier, most USPS services would increase by around 3%. While this doesn’t seem like much to prepare for, retailers must consider the difference. Notably, the price of First Class Letter Mail would remain the same. Rate changes for this service are scheduled for July of 2022.

Flat Rate Envelopes

Packages

International Mail and Packages

Additional Services

*Information from Stamps.com

Final Thoughts

USPS isn’t the only carrier slated to increase its prices in 2022. Major shipping companies across the country, including DHL, FedEx, and UPS, have also released their rate changes for the year. It is crucial to keep up with these rate hikes to remain in the green. 

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