Logistics – and the inability to get products delivered on-time – has re-emerged as a critical issue for companies in China trying to deliver goods to buyers in the US, Europe and other locations.
The United Nations’ Conference on Trade and Development has described the current issue as an “unprecedented shortage” of shipping containers, which has caused a surge in logistics prices and hampered the global economic recovery. Changes in economic consumption patterns during lockdown (more e-commerce purchases of goods), production switches to Chinese factories while other parts of the world remained on lockdown and the six-day blockage of the Suez Canal in late March are all contributing factors to the current situation.
It is more important than ever to have weekly (and in some cases, daily) interactions with suppliers to make sure goods are “getting on a boat” – that is, logistic companies are receiving containers and shipping them on time.
PRI has often been asked to help with this process. It can be very difficult when the buyer in the US and the supply chain in China have not been communicating well (especially challenging given time difference if communications are happening on opposite sides of the world), but it is possible to turn things around.
One PRI customer ships between 30 and 40 of the 40-foot shipping containers each week from the Pearl River Delta in south China to its customers in the United States. However, of the three shipping companies they usually work with, none could give them even a single container in the final week of April, in part due to global supply chain disruptions caused by the blockage of the Suez Canal.
If there were no shipping containers available to move the product out, work at the factory would grind to a standstill, and the customer would experience stockouts. PRI’s team worked with their logistics contacts to help the customer piece together a collection of 31 containers for the week and complete the factory’s shipments on time.
Another US company had sourced products in China for years and its existing relationships with freight forwarders and shipping companies made it so that they were able to achieve reasonable, on-time delivery. However, the challenges of 2020 and 2021 left them needing help. PRI’s success in helping them ship containers out of the Shenzhen port has led to continued requests for assistance in shipping raw materials from other cities in China.
Some companies with mission critical goods “stuck” in China due to a lack of container availability have resorted to air freight. Earlier this month, PRI assisted a US-based company and its China-based supplier to book a cargo airplane that could take three shipping containers full of products. This was the first time the company and the supplier had done air freight and PRI walked with them through the process from start to finish, including coordinating a weekend rush of goods from the factory to the airport when an airplane became available.
This type of “rush” is not uncommon in 2021, as the China export shipping market has changed quickly from a buyers’ to a sellers’ market. Prior to the current container shortage, companies would have time to get multiple bids and negotiate prices. Now, decisions often must be made with freight forwarders in less than five minutes by responding with a “yes” or “no” – with no room for price negotiation.
Experts forecast the container shortage and high prices to continue in to 2022 – meaning companies sourcing and manufacturing in China can’t expect things to go back to “normal” any time soon.
PRI is available to help companies navigate international logistics. To schedule your free consultation with PRI’s experienced team of logistics consultants and managers, write to Jonathan Kendrick at firstname.lastname@example.org
PRI Management and Consulting helps US, European and other foreign companies thrive in China because we think like owners. We are not a Beijing think tank - 30 years of experience and offices in each of China’s major economic super-regions (Beijing, Shanghai and the Pearl River Delta) allow us to address the entire country. We help you develop growth strategies, hire and administer some of the world's best engineering talent, build your supply chains and sell your products and services to the world's fastest growing and biggest market.
To download our latest whitepaper “Six Critical Steps for China Success in 2021: What Mid-Sized US Companies Must Do Now to Thrive in the World’s Fastest Growing Large Market” and subscribe to our monthly newsletter, visit: www.pri-usa.com/six-critical-steps-for-china-success-in-2021