The current lockdown in Vietnam is causing goods to be delayed by 25 days on average from Southeast Asian ports. Meanwhile, an interruption in power supply in Chinese factories is causing imports from the Far East. This will have a negative impact on the holiday season as many importers have been struggling with high transport costs and limited freight capacity for several months.
Apple, Adidas, and Nike are all strongly affected
The lockdown in Vietnam has had a major impact on Nike, Adidas, and Apple. For example, the US company produces half its shoes in China, and a third of its clothing there. It has lost ten weeks of production. German software company Setlog anticipates that the entire supply chain will be reconstructed within months.
Ralf Duester is a member the Setlog board. He says that many factory workers fled the city to survive. “Many factories were closed or the workers could only work weekly shifts in cities. Duester expects more production to leave the country, which is a popular choice for many companies as an alternative to China.”
Holiday season will be affected
The supply chain management experts at Setlog say that the situation won’t change much until after the holidays. They believe that there will be some relief for the most part after Easter 2022.
This forecast is supported by data: Setlog analyzed data from 100 brands and companies that used Setlog’s SCM software OSCA in the second half of 2019. According to the evaluation, products arriving in European warehouses from Vietnam can take up to 25 days longer than usual. Only 17 percent of deliveries arrived on time in 2021, compared with 70 percent in 2019 or 38 percent in 2020.
Rail and ocean freight are affected by delays
The ocean freight sector was specifically examined by the experts. They found that on average, the shipping time of containers from the Far East rose by nine days. They are expected to arrive in 52 days. However, rail shipping can experience delays up to several days. This can be due to delays at customs crossings or capacity bottlenecks. Setlog’s analysis showed that rail bookings can be made up to six weeks prior to the departure of the freight train.
Duester believes there is a glimmer in the future as freight rates have stabilized over recent weeks. There have been initial rate reductions, but at levels that are depending on the shipping line, relation and loop, six to eight times the pre-pandemic levels. In some cases, prepaid rates fell by approximately 1,500 US Dollars (roughly 1,100 British Pounds or 1,300 Euros). Shipping companies may wish to freeze their rates. There has been a slight increase in the availability of ocean containers. They are now available on most routes, with some exceptions.
Collaboration and planning ahead are key
“It is important that importers, suppliers, forwarders, and carriers work together.” Duester advises that data and information must be shared transparently, digitally and quickly. He believes that the turbulence of this year will recede in the long-term.
Patrick Merkel, managing director at Prologue Solutions GmbH in Hamburg, says that “problems such as the shortage of truck drivers, especially in the UK but also in Germany and other European countries, will massively disrupt supply chain disruptions if they are not addressed promptly.”