The Supply Chain Matters blog highlights an added dimension to our monthly summary of global supply chain activity trending and implications.

In a prior published commentary, we provided highlights of March and Q1-2022 global production indices along with their implications.

We now add highlights of March and Q1-2022 key global transportation and logistics indices.

March and now Q1-2022 data point to continued disruption, added cost inflation and elongated transit times continuing to be manifested in the months ahead.

 

Global and Domestic Transportation and Logistics Indices

Global Shipping

The World Container Index, assessed by Drewy Consultants, is a compilation of eight major shipping routes to and from the United States, Europe and Asia.

The value of this index as of the end of March was $8152.09 per 40-foot container. That compares to $9,279.46 per 40-foot container reported at the end of February. This index stood at $9,304 at the end of 2021. Part of this decrease may be attributed to temporary declining freight volumes as regions in Asia continue to deal with COVID-19 related suspensions of production, shipping or transport operations.

For the specific routing of Shanghai to Los Angeles, the index was reported as $9112 at the end of March, compared to $10,986 at the end of February. For the specific routing of Shanghai to New York, the index was $11, 531, reflecting a six percent decline.

 

Shipping Transit Timeliness

The Flexport Ocean Timeliness Indicator tracks average ocean container shipping transit times. Data published at the end of March indicates that for movement of ocean container shipping transit from Asia to North America, the average time had declined to 108 days, upwards of 15.4 weeks. The index that tracks ocean container movement from Asia to Western Europe increased to 116 days, reportedly a new record. The authors noted that it was unclear as to whether the conflict in Ukraine and associated disruptions to ocean shipping made for the difference.

In February, a new Stage I Measure was introduced, which tracks that average period from cargo ready to origin port departure. For this report’s average of the four weeks to April 3, 2022, the Stage 1 Measure for both westbound and eastbound movements reportedly declined.

One of the more concerning areas at this time is that of China, where one of the most troubling outbreaks of COVID-19 infections, and consequent containment policies from China’s regulators, continue to impede trucking transportation, ocean input and export movements. International logistics services firm Kuehne + Nagel International indicated this week that upwards of 100 vessels were awaiting to be processed by port berth facilities at the Ports of Shanghai or Ningbo. While port operations remain open, trucking firms and logistics carriers remain constrained in their ability to move both import and export inventory because of the local restrictions and mass testing requirements that are  impacting worker availability. Similarly, factories in areas of Shanghai, Shenzhen and Jalin provinces have had to restrict workers to manufacturing campuses in order to maintain operations. Trucking disruptions in these areas threaten the flow of inbound and outbound inventory.

 

US Logistics Index

The Logistics Managers Index Report®, compiled by researchers at Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University and the University of Nevada Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP), reported a March 2022 record high value of 76.2. The report authors noted that continued inventory congestion has driven inventory costs, warehousing prices and overall aggregate logistics costs to all-time high levels.

The report authors specifically noted:

“This influx (inventory), combined with a cool-down in consumer demand due to the move away from goods and back towards services with easing COVID restrictions, as well as price pressure due to burgeoning inflation, has left firms with more inventory than they know what to do with. Because of this, both Inventory Costs (91.0) and Warehousing Prices (90.5) reached all-time high levels in March. Warehousing Capacity also hit a record in March, reaching an all-time nadir of 36.1 this month.’

The average LMI index over the first quarter of 2022 was reported as 74.5, well above the all-time average of 65.2.This index’s value was 75.2 in February, noted as the second highest in the history of this index, and 71.9 in January,. The March value is noted as now representing 14 consecutive months of index readings over 70.0 which are classified as significant expansion.

Inventory levels reportedly dipped to 75.7 from February’s 80.2 level but costs of that inventory increased to a record index number of 91. Such factors are leading to added concerns that warehousing costs will become even more expensive in the coming weeks.

 

Supply Chain Matters Additional Insights

March and Q1-2022 data would tend to indicate that global transportation and logistics disruptions are easing, but fast-moving events in February and now March indicate to the contrary.

According to data from Sea Intelligence, upwards of 12 percent of global container vessel capacity was reportedly “lost” in February because of ongoing delays and port congestion. While months of congestion affecting the two major U.S. West Coast ports has eased, congestion and back-up now involves major U.S. East Coast ports including the Port of Savannah, Charleston, and New York/New Jersey.  As noted in the above highlights, the situation occurring at China’s major ports remains concerning.

This week, Bloomberg Supply Lines cited data released from AmCham China indicating that 60 percent of respondents surveyed indicating that government ordered shutdowns and inability to obtain timely inventory has slowed production. Further, 86 percent of manufacturers indicate disruptions to trucking and shipping networks were impacting their supply chains.

Such data would portend that added disruption and higher transportation and logistics costs loom significant in the coming months, particularly related to movements from and to China.

Yet to be recorded but sure to have an impact are higher energy prices as a result of the severe sanctions being placed on the Russian economy as a result of the Ukraine conflict.

Ongoing developments further reinforce that seamless sharing of various global wide and domestic inter-modal transportation and logistics movement data, coupled with context to various implications, remains an essential requirement.

 

Bob Ferrari

© Copyright 2022, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.