In the midst of the Red Sea crisis, global schedule reliability continued to decline.
Global schedule reliability fell -5.1% points to 51.6% in January 2024 (the same monthly decline as in December 2023). This decline means that the January 2024 figure is the lowest since September 2022. Year-over-year, schedule reliability in January 2024 was -0.8 percentage points lower than in January 2023. The average delay in ship arrivals due to African voyages has deteriorated further, with an increase of 0.59 days to 6.01 days month-over-month.
What can shippers do to mitigate the impact of poor schedule reliability?
1. Good Planning in Advance
Planning is the cornerstone of a smoothly functioning and reliable supply chain and is perhaps the most fundamental measure that helps to eliminate or minimize risks emanating from the most controllable and known factors.
These include, among others:
- Better forecasting to ensure timely availability of space and equipment.
- Ensuring that all legal requirements are met and that the necessary documents and records are available on time.
- Planning dispatch taking into account current market conditions (e.g. peak season delays, availability of equipment and space at sites, etc.)
- Moving away from just-in-time inventory management and incorporating buffer stock and lead times into supply chains.
As global connectivity has greatly improved, companies can rely on fast and reliable shipping connections to ensure the timely delivery of raw materials and finished products to their factories and warehouses.
However, as global congestion and delays become more frequent and the interconnectedness of the international supply chain exacerbates the negative impact of local events, shippers face a higher risk, resulting in lost production and impacting sales.
For this reason, companies are now tending to keep their stock levels to a minimum and instead build up reserve stocks that are sufficient to cover production needs in the event of a short-term disruption to transport chains.
To avoid delays caused by interruptions to deadlines, companies are also moving towards placing orders earlier rather than waiting until stocks have shrunk to an acceptable minimum.
Creating this buffer increases the cost of warehousing and the cash tied up in it. However, this far outweighs the potential benefits of providing a buffer against freight and vessel delays and insuring against the risk of stock-outs.
2. Spreading shipments across multiple vessels and over a period of time.
Instead of sending all containers in a single shipment (loaded on a single vessel), it would be better to split the cargo and book it separately. This way, the cargo is transported by different vessels sailing on different days.
This ensures that, even if a ship is delayed for some reason, the shipper can have his cargo arrive on another ship, thus avoiding all his cargo being stuck on the ship.
It also makes sense to spread shipments over several weeks as long as stocks allow.
3. Spread the risks by working with different container carriers.
It is common knowledge that customers with larger volumes are offered better rates by shipping lines. This often leads exporters to hand over all their cargo to a single container carrier in order to get lower freight rates.
While this allows the exporter to benefit from lower rates, it also significantly increases the risk that the counterparty will not be able to fulfill the carrier’s contractual obligations (e.g. carrier operational problems, staffing issues, financial constraints, overbooking, limited capacity or other factors), all of which result in the exporter being unable to transport its goods.
This risk can be mitigated by working with a pool of carriers by splitting the total volume among several known and trusted carriers, often through variable RFQs (Request for Quotations).
