Nestled on the Yangtze Delta, Shanghai is the world’s busiest port. Last year, the port handled the equivalent of 47 million TEU (twenty-foot equivalents), three times the volume of Europe’s largest port, Rotterdam. Each month, the Shanghai port receives 2,000 ship visits, loading and unloading everything from raw materials to vehicles, as a critical hub of global logistics. While capacity issues and congestion have been a persistent issue, particularly over the last few years, there is now a far greater problem.
Following some of the world’s strictest lockdown measures, Shanghai and by extension its port, has ground to a halt. As of April 2022, there were over 500 vessels awaiting berths. With far fewer staff available to keep the port running, there is an immense backlog of an estimated 260,000 TEU of unshipped cargo. This is predicted to cause a global shipping market surge over summer with severe implications for global supply chains.
First and foremost, the influx of unshipped cargo will place immense strain on the existing ocean freight capacity. This could cause a vast increase in supply chain costs at a time when logistics are already suffering from all-time-high fuel prices. This backlog will also have secondary effects in destination markets, including road freight, warehousing and distribution networks.
Additionally, any businesses or organisations waiting on goods or ships caught in the Shanghai backlog may be harshly impacted if they are without effective alternative logistics. If important components are substantially delayed, assembly lines may be suspended, costing millions. Equally, the lack of materials or goods may cause acute cashflow problems, something that must either be endured or viable alternatives found.
While some companies may have been able to ramp up or switch to different suppliers in alternative geographic locations, others may not have the resources or connections to do so. Without contingency plans in place for critical supply chains, businesses may soon feel the sharp sting of the Shanghai situation.
Given recent global instability and the compounding effects of things like the pandemic, natural disasters and the invasion of Ukraine, having secondary and tertiary logistics options is critical. It goes without saying that these past two years of immense disruption have highlighted the importance of having contingencies!
While there is nothing that can feasibly eliminate the impact of unforeseen circumstances and supply chain risk, there are certainly important steps that should be taken. To start with, businesses should work alongside a trusted logistics specialist to develop and map out contingency plans – particularly for higher-risk locations, suppliers and routes.
These contingencies could involve anything from emergency air cargo to rapid implementation of emergency logistics to alternative suppliers. In the event of supply chain disruption, the contingencies can be utilised, and emergency logistics swiftly put in place to mitigate, as much as possible, the event’s impact.