The days of blissful back-to-school shopping at your favorite Mega Lo Mart might be coming to an end due to the ongoing chaos in ocean freight shipping. Plus, a closer look at detention and demurrage fees, the end of Ever Given's fateful journey, why things are looking up for air cargo, and more in this week's Friday Five. Let's dig in!
First the pandemic closed schools and teachers, parents, and students adjusted to at-home learning. Now we are facing new challenges now that we are headed back to school in person (at least for now).
Shortages in back-to-school items as well as soaring prices are making shopping more difficult for parents and teachers this year. Overwhelming demand for ocean freight from shippers and logistics service providers has led to on-going capacity shortages. As a result, ocean cargo continues to be in chaos and will leave many searching for back-to-school items shorthanded.
Some retailers are even looking to leverage air freight to get supplies into stores as capacity is being taken up by the world’s largest retailers.
Citing a study from The Wall Street Journal, Mallika Mitra reported “Transportation, including from China and other Asian countries, has become significantly more expensive. Retail giants like Walmart and Amazon are scrambling to nab space on shipping containers as they try to restock after pandemic-induced supply chain disruptions.”
Originally setup to ensure cargo is moved swiftly from ports, marine terminals and railheads, detention and demurrage fees collected by carriers is now making a big impact on their bottom line. In Maersk’s first quarter earnings report, non-freight related ocean revenue which includes storage and equipment fees rose 6.2 percent which equates to $1.3 billion and represents 13.5 percent of total ocean revenue.
The frustration around the growing fees involves how fair it is to bill shippers and their truckers when they cannot pick up nor return containers within the free-time limit window due to congestion.
Detention and demurrage fees are going to be further scrutinized by the Biden administration according to the recently issued July 9th executive order, along with the U.S. Federal Maritime Commission (FMC) as well as being cited several times in recent draft U.S. legislation.
The ship that clogged global supply chains and gained worldwide attention finally arrived at the port of Rotterdam. The Ever Given arrived on July 29th and began the process of unloading a portion of its more than 18,000 containers. After the stop in Rotterdam, the vessel will move on to Felixstowe, UK where it will offload the remainder of the containers. Once unloaded, the ship will be taken out of service to go through inspections and likely repairs.
In the first half of 2021, global air cargo volumes hit levels not seen since 2017. Disruption in ocean freight shipping and capacity shortages have created a high demand for air freight to fulfill consumer demand.
The leading indicators of air cargo demand according to the IHS Markit Purchasing Managers’ Indices show US, Europe, China that business confidence is growing, and manufacturers output is growing to meet new orders.
Because the expected shift in consumer spending has not yet materialized from goods to services, the US inventory-to-sales ration has fallen to a record low triggering a need to replenish inventory through air cargo.
As many retailers are struggling to attract and retain their workforce, the largest private employer in the US announced a major investment in its employees. Over the next five years, Walmart will invest nearly $1 billion in career training and development programs for its workforce who are interested in pursuing degrees in high-demand fields such as supply chain, business administration and cybersecurity.
During a recent media call, Lorraine Stomski, senior vice president of learning and leadership at Walmart said “We are creating a path of opportunity for our associates to grow their careers at Walmart. This investment is another way we can support our associates to pursue their passion and purpose while removing the barriers that too often keep adult working learners from obtaining degrees.”
If you missed it, be sure to check out last week’s logistics news recap which explains how we found ourselves in a perpetual peak season and what to do about it. And stay tuned every Friday for a roundup of the week's biggest logistics headlines in our weekly blog, The Friday Five.
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