Insights highlighting the global interconnectivity and interdependence of supply chains .
From the shipping issues that have plagued organisations all around the world to Australia ’ s industrial actions , these issues are all interconnected and can only be addressed when taking into consideration the whole international supply chain .
Surges in demand for ocean freight The surge in demand and loss of passenger planes for air freight , has put incredible strain on shipping supply lines , with more than 90 per cent of the global fleet being utilised to service current demand .
Many containers are being shipped at huge premiums , which is significantly impacting Australian businesses as we are predominantly an import nation and highly dependent on efficient supply lines from Europe , the Middle East and within Asia-Pacific .
Businesses that can afford to ship are reluctantly passing on additional costs to their customers or absorbing losses just to stay afloat . Sadly , many others who cannot sustain the losses are not shipping as much or in some cases not at all , losing valuable market share .
The undersupply in the ocean freight market is set to continue , with new ship builds in the pipeline not expected to come onto the market until 2023 , as it takes roughly two years to build a ship . This will keep upward pressure on freight rates .
While shipping lines have been beneficiaries of this constrained market generating high rates and using this opportunity to diversify their service offering , it is putting a strain on their commercial relationships . FMCG businesses in Australia must seek better contracts and partnerships with their logistics service providers to secure space and prioritisation in a hotly contested market . Additionally , businesses need to invest in integrated technology solutions that will enable more effective planning and management of their supply chain and optimisation of cost , service and compliance across their international and domestic value chain .
Pressures on local infrastructure The growth of inbound freight to our shores is increasing road congestion , causing an imbalance of empty containers in Australia and putting upward pressure on land availability and property costs for cargo owners and third-party logistics providers .
The increased transport of containers has led to greater inefficiencies and carbon emissions by Australian businesses in their supply chains . This has led to ongoing investments in developing more intermodal terminals to process freight more efficiently between wharf terminals and the end customers , while enabling a decrease in carbon emissions by shifting transport from road to rail .
In Australia , we have a significant imbalance of empty containers . Businesses need to be mindful of paying additional charges in container detention where containers cannot be returned and dehired fast enough due to a lack of empty container parks or additional road freight costs resulting from redirections .
Additionally , the availability of serviced industrial zoned land in New South Wales and Victoria is extremely scarce , putting upward pressure on property costs . Businesses looking to invest in new facilities to cope with their demand are having to act quickly in the midst of escalating costs .
Last-mile logistics , the role of technology and industrial actions
The increased demand has put incredible strain on last-mile logistics networks , although positively many businesses during the pandemic invested in digitalising their processes to optimise operations , reduce costs , improve compliance and more effectively service customers .
Many businesses have made advancements in their transport management systems ( TMS ) and warehouse management systems ( WMS ) managed by centralised control towers to enable improved end-to-end visibility in their supply chains . These evolving technologies enable businesses to make informed data-backed decisions based on real-time analytics and provide customers greater insights and updates on their products .
New “ disruptors ” with strong technology value propositions have entered the last mile and shipping space . Organisations like DoorDash , Sherpa and Uber enabled by the gig economy are starting to play in the last-mile space , and third-party logistics providers and shipping companies are investing more in their technology and automation strengths .
On the other hand , these new disruptors in the market have led to industrial actions by port and transport workers focused on pay and the security of their jobs . Considering this , the sector needs to take a long-term view on how technology will enable a more efficient , optimised , safe and sustainable end-to-end network , rather than focus on low costs .
While the global supply chain and shipping issues were exacerbated in 2021 , for 2022 and beyond these issues won ’ t be anything new for FMCG businesses in Australia . Even with the looming Omicron Covid-19 variant , businesses have experienced all these shipping , infrastructure , last-mile and industrial action issues before and have learnt a lot along the way . With many FMCG businesses having made investments in technology and digital enablement in their supply chain , they can be much more flexible and agile in their operations to respond to future disruptions more effectively .
JAMES SHEERIN is a senior consultant at TMX .