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As Ocean Rates Decline, Challenges Still Persist

Updated: Oct 28, 2022

Right now, shippers around the globe are starting to believe they are seeing the light at the end of the tunnel with their supply chain issues, as ocean freight rates continue to decline. However, this vision may be more of a mirage as the problems affecting the supply chain go far beyond ocean freight rates.

Inland connections, labor uncertainty, and low reliability are wreaking havoc on the supply chain, causing significant delays in shipments getting to their final destinations. These difficulties are a biproduct of shrinking labor forces at warehouses and rail terminals, severe chassis shortages throughout the country, and ongoing union labor disputes. As a result, rates continue to remain elevated.

“Shippers continue to think their overall costs will be dramatically reduced because ocean carrier West Coast rates have declined. Unfortunately, due to all delays and unavoidable storage space, that is not the case,” said Anthony Fullbrook, President of OEC Group’s Northeast Region. “What shippers have to understand is that the supply chain is very nuanced and there are many factors that affect both cost and transit time.”

While most experts have blamed the recent labor disputes for the various fees, surcharges, and congestion, the reality is that issue is only partly to blame. Another significant and less easily solvable problem, the lack of labor, has been the main contributing factor in the inland congestion that is currently plaguing the industry, particularly with the stacking issues that are affecting all U.S. ports and rail yards.

In fact, one needs to look no further than the Port of Los Angeles to see how these labor issues are creating bottlenecks that result in container stacking that adds to the congestion and delays the transfer of containers from port to rail, impacting the rail system and supply chain. According to reports, there are currently tens of thousands of containers waiting for an IPI connection to take them to their final destination – way more than what is normal at this time of year. In short, while cargo is now able to get to the port, getting it out of the port and to its final destination can still take months and incur significant amounts of surcharges and fees.

“Shippers need to go beyond ocean freight rates when making decisions about their logistics strategy, because the issues affecting the supply chain are not always in plain sight,” said Jason Haith, Louisville, KY Station Manager. “The key to navigating these obstacles is to diversify your pricing and inland routing strategy. Working with a seasoned and knowledgeable logistics expert who can see the big picture is critical, as their expertise can help shippers weather this storm and achieve a healthier bottom-line.”
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