Just in Time or Just in Case?

If you read any of the analysis about what’s happened over the last year in the global shipping market, there’s two pretty broad schools of thought.

One is that the market has held up remarkably well, given that we’ve experienced two ‘black swan’ one-in-20-year or one-in-100-year events in the form of the Suez Canal blockage and the pandemic.

I think it’s fair to say that the impact of the Suez Canal blockage was nothing like as serious as we feared; and it actually took less than a week to relieve the backlog of shipping once they had actually freed the Ever Given ship which was pretty impressive.

However, those of us who are still dealing with container shipping costs which are around five times normal levels, while watching the profits of the container shipping industry increase at record levels, would certainly take issue with the fact that it held up well during the pandemic.

Economists might argue that the system survived even though it was strained to breaking point but there’s no doubt that, at times, it has been like the wild west out there. Ports across the world have been in chaos and freight companies have found themselves scrapping over reduced shipping capacity right at the time of peak demand.

We’re obviously still having to impose freight surcharges to try to share some of the burden of the rising costs we’re facing along the supply chain, but I can assure customers that we are keeping those surcharges under constant review in the hope that prices will stabilise over time.

As I posted recently, there’s reasons to be optimistic because shipping companies have placed orders for a record volume of new container ships over recent months, but that’s definitely a long term rather than a short-term fix.

There are many though who believe that the market can never really return to the pre-pandemic status-quo and that the weaknesses it exposed in global supply chains will have to be addressed via different strategies.

There’s talk of some reshoring of supply chains as a result of the pandemic and a switch from ‘just in time’ to ‘just in case’ stocking levels. Several of the big shipping companies are buying up freight forwarders and warehouse operators to try to upgrade their logistics offers in-country and reduce their reliance on Asian supply partners, and one French carrier has even bought four Airbus aircraft so that it can offer air freight solutions as well.

At Mila, we’ve obviously reviewed every inch of our logistics and supply chain since the start of the pandemic and have maintained the same level of communication and transparency with suppliers and customers as always.

Our demand planners have never been busier, but the nature of this market and the need for us to be able to respond to regular new business enquiries from both new and existing customers means that Mila has long had to be more of a just in case rather than a just in time business anyway. That’s certainly what has helped us to come out of this in a much better position than many other component suppliers and, while our OTIF score showing what % of product lines are in stock and available for next day delivery currently sits at 94.1%, I am extremely confident that it will back up to our normal 98-99% levels by June.

Richard

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