The ongoing lockdown in Vietnam is currently delaying goods from ports of the Southeast Asian nation by an average of 25 days, while an interrupted power supply in Chinese factories is also affecting imports of products from the Far East. This will negatively impact the upcoming holiday season, as many importers have already been suffering from high transport costs and a lack of freight capacity for months plus these two additional difficulties in the fourth quarter.
Apple, Adidas and Nike are strongly affected
Among others, Apple, Adidas and Nike are strongly affected by the lockdown in Vietnam. The US company, for example, produces half of its shoes and a third of its clothing in China and has already lost ten weeks of production time. German software company Setlog expects the recovery of the entire supply chain to take months.
“Many factory workers have fled to the countryside to survive because there was no work in the cities, the factories were closed or they could do only weekly shifts,” explains Ralf Duester, a member of the Setlog board. He expects that more production will move out of the country, which many companies recently chose as an alternative to China.
Holiday season will be affected
According to Setlog’s supply chain management experts, the situation will not change significantly until after the holiday season. At the earliest, they say, there would be significant relief after Easter 2022.
This forecast is backed by data: For their analysis, Setlog evaluated data from 100 companies and brands from the second half of 2019 and 2021 that use Setlog’s SCM software OSCA. The evaluation showed that products from Vietnam are delayed by an average of up to 25 days before they arrive in European warehouses. In 2021, only 17 percent of all deliveries have been arriving on time, compared to 70 percent in 2019 and around 38 percent in 2020.
Delays affect ocean freight and rail
The experts looked specifically at the ocean freight sector and found that the transport time for containers from the Far East increased by nine days on average; they are en route up to 52 days this year. But there are also delivery delays of several days for those shipping by rail. This is due to capacity bottlenecks and delayed clearances at some customs crossings. Setlog’s evaluations showed that rail bookings are made on average four to six weeks before departure of the freight train.
However, Duester sees a glimmer of hope on the horizon as freight rates have levelled off in recent weeks and there have even been initial rate reductions - albeit at levels that, depending on the relation, shipping line and loop, are six to eight times of pre-pandemic levels. Prepaid rates dropped by around 1,500 US dollars (about 1,100 British pounds or 1,300 euros) in some cases. Some shipping companies want to freeze their rates. The availability of ocean containers has also eased slightly. They are available on almost all routes and only in individual cases are there still problems.
Planning ahead and collaboration are key
“It is still important here that bookings are made early and that suppliers, forwarders, carriers as well as importers work closely together. Data and information must be exchanged transparently, quickly and digitally,” advises Duester. In the long term, he believes that this year’s turbulence will subside.
“But problems such as the truck driver shortage, particularly in the UK, but also in Germany, other European countries and the US, will massively disrupt supply chains if measures are not taken promptly,” points out Patrick Merkel, managing director of Hamburg-based Prologue Solutions GmbH.