The “attunement” for Christmas came unusually early this year. As early as August, the head of the port of Los Angeles said that consumers should bring their Christmas shopping significantly earlier this year so that they are not left empty-handed on the holidays. The CEO of the toy manufacturer MAG has already warned: “Many children will not get the toys they want.”
Disappointed children at Christmas – that’s just a luxury problem. The supply shortages caused by the global container crisis, however, are of existential importance: car companies stop production, construction companies are waiting for material, and dealers are hesitant to hire staff for the Christmas business because goods may be missing from sales. And that at freight prices that, depending on the route and contract, are three, five or even ten times as expensive as before the outbreak of Corona.
No question about it: the pandemic has thrown the supply chains of the economy out of sync. In July 2021, only 22 percent of the container ships from Asia reached their destinations in Europe on time. The vast majority arrived late, an average of eight days. Before Corona, however, in July 2019, around 90 percent of the ships were on time, the rest were consistently three days delayed.
The causes of the disruption are known: Corona lockdowns first in China, then worldwide; Boom in demand for medical goods and home office equipment; private investments in furniture, bicycles and garden tools as a result of the enforced restrictions on vacation and catering. And finally there are events such as the accident of the container ship “Ever Given” in the Suez Canal and the closure of the Chinese ports in Yantian and Ningbo.
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Local decisions have global consequences
The example of Yantian, the fourth largest container port in the world, shows the global consequences of such incidents. After the Chinese authorities almost completely shut down the port in the metropolis of Shenzhen in May and June due to new corona cases, up to 130 ships jammed in front of the entrance. In the first half of June alone, 298 freighters canceled their stop in Yantian on their worldwide voyages. Millions of containers did not arrive where they were needed, or only arrived much later.
The effects will keep us busy for months. Such local lockdowns will continue to exist, also in air freight and land transport, because the pandemic is far from over. The exceptional situation in the supply chains will last at least until next early summer, a return to the pre-corona level is not in sight.
The fact that so many goods have been transported since the beginning of the crisis, including vaccines, tests and protective medical clothing, is an impressive achievement. The export-oriented German economy in particular should be aware of the strategic importance of logistics. In any case, I am proud of our 78,000 employees. With their know-how and commitment, they have made a significant contribution to maintaining supplies to people and businesses.
As a logistician, we are the link between industry and trade on the one hand and the shipping companies, airlines and train operators on the other. We are the architect of our customers’ supply chains. And in addition to the current exceptional situation, we have an even greater challenge to overcome: How can we redesign the supply chains to be green, i.e. CO2-neutral?
Good will and nice appeals are not enough
Climate protection and sustainability have the highest priority in the entire industry and also at DB Schenker. Our corporate goal is: climate neutral by 2040. As an intermediate goal, we want to reduce emissions from European land transport and from our buildings by 55 percent by 2030 compared to 1990 levels. The target of at least 15 percent fewer emissions applies to global air and ocean freight over the same period.
But good will alone and beautiful appeals are not enough. For example, if we were to switch German truck traffic to alternative drives tomorrow, the economy would come to a standstill on the same day. Even in five years, the outlook would not be much better. That is why we have to be honest: there is a big gap between our goals and what is feasible today. We have to close this gap step by step. That is our job, we are working on it with all our might.
One important approach is to invest in scaling up synthetic, green fuels, such as non-fossil kerosene for aviation or electricity-based fuels for ocean freight. We are fully behind the goal of shifting 25 percent of transports to the railways in Germany and have been expanding our rail transports internationally for years, especially on the route between China and Europe.
Thanks to their increased cargo capacity and reduced speed, container ships are already traveling more efficiently and require only a third of the energy per transported unit compared to ten years ago. Nevertheless, the entire industry is confronted with considerable, non-postponable challenges that now have to be overcome in parallel to the problems of the Covid pandemic. What does this mean for our economy?
The new motto: Big is beautiful
First, to make supply chains more resilient, we need to invest more in infrastructure, especially in ports. Even the blockade of the Suez Canal triggered by the “Ever Given” disaster in March shows that there is a lack of alternative infrastructure. If the eye of a needle is blocked, there are no alternatives.
Second: Realistic time forecasts for shipments based on past and current data are becoming even more important for shippers, and overall the importance of data in logistics is growing. Suppliers and customers who can reliably plan transport quantities and times make a contribution to stabilizing the supply chains.
Third: Big is beautiful. Smaller loads are increasingly being bundled into larger loads. This points in the right direction, because it gives customers more flexibility and also cost advantages in terms of container rates. Size matters more than ever in the future.
Fourth: Customers want more transparency – for us logisticians this means that we have to provide real-time data about every single shipment in all containers. In addition, when booking, we have to provide information about the climate impact of the transport and, if possible, offer more environmentally friendly options.
Fifth, we should speak openly about the “Road to Zero” in our industry, that is, the goal of a climate-neutral transport system. Here, too, it is about transparency: what is possible today, what is not yet, where do we need support? One thing is clear: the investments that lie ahead of us can only be achieved by shippers, carriers and logisticians in a joint effort. If the will is there, we will succeed.
More: How companies around the world are restructuring their supply chains.