Dusseldorf Strikes by port workers in Hamburg and in Felixstowe, UK, the threat of labor disputes by transport workers in the USA, possible disruptions in the Taiwan Strait, through which almost half of all shipping routes worldwide pass: For fear of further bottlenecks, Europe’s dealers and importers are doing well this year a month earlier with goods for the Christmas business than usual.
“Otherwise, the main business for the logisticians started in mid-September, this year the high season starts in mid-August,” observes Chris Rogers, chief economist at the internationally operating online forwarding company Flexport in London. Empty shelves like last year, when notebooks, toys or sporting goods were in short supply, are what retailers want to prevent this time at all costs.
The signs that there are again drastic bottlenecks in transport from overseas, like those that spoiled the Christmas business in 2021, have been fading for weeks. Ship delays are decreasing, as are freight rates. The overzealousness of European importers, however, seems unbroken, which again leads to problems. In the end, it could harm the traders just as much as the supply chaos did the year before.
Christian Reinwald, Head of Marketing at online retailer Reichelt Elektronik, is one of those who stock up on goods early on. “One thing companies have learned from all the challenges,” he says: “adapt, insource, find alternatives and increase inventories.”
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And Ceconomy also follows this philosophy. The German market leader in electronics retail with the brands Media Markt and Saturn expects problems in the coming Christmas business due to delivery bottlenecks caused by the consequences of the Ukraine war and the corona pandemic. When presenting the figures for the second quarter in May, CEO Karsten Wildberger had already said: “We expect disruptions and are preparing for them.”
In the meantime, the group has significantly increased its inventories in view of the Christmas business. Ceconomy now has to worry more about how to sell everything given the weak consumer mood.
Some importers are already suffering financial losses as a result of the hamster strategies. Because the sea containers are piling up in the port of Hamburg in view of the early orders, the operators began to clear part of their storage areas on July 18.
The Hapag-Lloyd shipping company informed its customers that they were forced to transport containers that had been in the terminal for more than ten days “to external storage areas”. An “evacuation fee” of 300 euros is due for this. “We reserve the right,” the shipping company warned its customers, “to introduce an additional transit storage fee of EUR 50 per standard container (TEU) and calendar day.”
The Hamburg port operator HHLA believes that many steel boxes are only transported away from the quay with a delay because the importers are running out of their own storage space. Excessive warehousing is now a means for many companies to maintain their own ability to deliver.
Specialist suppliers want to solve logistics problems
The most difficult thing for retailers is that they can no longer rely on getting everything delivered at all times, explains Jochen Freese, who is responsible, among other things, for the procurement of transport capacities at the online forwarding company Forto. “The uncertainty is growing,” observes the manager of the logistics company, who works for Home24 and the sneaker manufacturer On, among others.
Hamsters are trending
50
percent
of German companies have increased their inventories over the past year, according to the Institute for the World Economy (IfW).
And with it a lot of good advice from specialist suppliers on how to get a handle on it. The start-up Prewave from Vienna, for example, advertises that risks can be automatically predicted using a social media analysis in 50 languages. In the same way, the logistics start-up Forto consistently relies on the evaluation of digital data that it receives from its partners and customers.
“You get information about disruptions in the supply chain much earlier and more reliably,” says Freese. “If I know in good time that I have a problem, I might be able to react before my container gets stuck in traffic.”
He recommends that retailers should go into much more detail in their discussions with logistics partners. Then, for example, alternative ports could be identified at an early stage. It is also possible to store goods halfway so that you have them at hand without filling up your own warehouse.
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The first step is to analyze exactly where there are dangers in the supply chain, advises Matthias Friese, manager at the logistics giant Fiege, who maintains contact with the start-up scene through the freight forwarding subsidiary XPress Ventures. Today it is possible to process the entire purchase down to the component level using digital tools.
This means that disruptions can be recognized immediately and action taken accordingly, such as choosing an alternative means of transport or a new route. Established service providers in this area include Project44 and Fourkites in the USA as well as Transporeon and Shippeo in Europe.
Start-ups like Zenfulfillment or Alaiko go one step further. They promise their corporate customers to keep a constant eye on their inventory and the impact on sales and cash flow. Because they determine sales data in real time, this improves the forecasting of goods requirements and availability.
The electronics retailer Ceconomy wants to be better prepared for the Christmas business this year.
(Photo: imago images/Michael Gstettenbauer)
Experts recommend even more radical measures to escape the supply shortages. Lutz Feldmann, responsible for the Central European business of the US manufacturing provider Markforged, is promoting the use of 3D printers to avoid being dependent on just-in-time suppliers.
Initial approaches seem hopeful. The Bürener Maschinenfabrik ordered BMF 3D printers in order to use them to manufacture different adapters that are required for the use of sandblasting systems. The shipping packaging manufacturer Mayer Kuvert has also put such printers into operation. With the filling compound, a mixture of polyamide and carbon synthetic fibers, he produces used spare parts for defective machines at short notice. This puts an end to his fear of torn supply chains.
Companies rely on the hamster method
But the majority of companies are still relying on the hamster method for fear of renewed supply gaps, which is causing warehouses across Germany to overflow. According to the Kiel Institute for the World Economy (IfW), 50 percent of German companies have increased their own inventories over the past year, and 21 percent no longer expect to return to just-in-time deliveries.
Even areas that used to be classified as old or dilapidated are now fully utilized, reports Krisztian Abzalov, product manager at the Austrian logistics company Cargo Partners, which also has storage capacities in Germany. Demand is currently far in excess of market capacity.
In addition, the excessive stockpiling of German dealers and importers poses a risk that cannot be ignored. “We’re seeing a huge increase in the cost of living right now, interest rates are rising, and many households have spent a lot of money on travel again this year,” says Flexport economist Rogers. Consumer confidence is as low today as it was in the middle of the corona pandemic.
>> Read also: The downside of thrift: Europe’s largest food forwarder is struggling for capacity
The demand rather than the supply side is causing concern in the current high season. “Electronics will probably be bought far less this year than in 2021 because everyone has now gotten a computer for their home office,” believes Rogers. At best, there could be another bottleneck before Christmas for toys. “Usually it is only decided shortly before the festival what will be the big hit with the kids,” explains the logistics specialist.
The seriousness of the situation is illustrated by the consumer climate index of the market research company GfK, which fell to a record low in July. At 27.4 points – 1.2 points less than in June – this was the lowest value since measurements began in 1991.
The extent to which consumer demand has subsided has been reflected in sea transport for several weeks. Global average container prices fell 18 percent from $3,339 in July to $2,730 in August. “In some places, shipping companies are even offering discounts again,” notes Rogers.
At the end of the year, the situation for importers is likely to ease even further, as Søren Skou, CEO of the Danish shipping company Maersk, announced a few days ago. “We are seeing weaker transport volumes in some markets,” he said. That’s why his shipping company is assuming a “gradual normalization of rates from the fourth quarter” – and a relief from the bottlenecks. Similar signals came from competitor Hapag-Lloyd last week.
Instead of continuing to fill up their own warehouses, Flexport specialist Rogers has long been advising a more cautious strategy: wholesalers and importers should seek close contact with retailers, he recommends. “This protects against surprises if, instead of the feared gaps on the sales shelves, your own warehouse suddenly overflows.”
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