Managing global supply chains in times of disruption

Seatrade Maritime News recently sat down with Niki Frank, CEO Asia – Pacific for DHL Global Forwarding, to discuss how it manages disruption in the container shipping supply chain and works on contingency planning with its customers.

As one of the world’s largest freight forwarders DHL Global Forwarding handled some 3.089 million teu of ocean shipments and 1.672 million tonnes of air freight in 2023 and has a global presence in over 150 countries.

Coming out of the supply chain disruptions of the pandemic it was expected that shipping and logistics markets would normalise, but this has not happened, and it is now more a case of expect the unexpected.

“Well, it’s certainly been a very interesting and challenging year for the whole industry,” Frank says. “I used to joke that 2 - 3 years ago after the first years of pandemic, I think we told our people that last year was tough, it was very challenging but next year's going to be better. But we were wrong with that. We learned our lesson we’re not going to say the next year will be easier or better.”

On a more serious note, he adds, ““I think what that implies is we’ve gotten much better in managing, and gotten much more agile, in how to react to the disruptions.”

For example, in the case of the recent, and fortunately short-lived, Canadian rail freight lockout and strike, there was plenty of early warning, so DHL Global Forwarding was able to prepare the organisation the situation.

Related:Bleak supply chain outlook as USEC strike looms

“We know, and the industry has become much more aware that something will always happen; that’s the new normal. And we're much more ready for it both mentally, as well as in terms of the solutions that we can offer our customers.”

This year has certainly been no exception in terms of challenges and disruptions with shipping lines diverting from the Red Sea to avoid attacks by the Houthi in Yemen, and all the knock-on effects this has had, and now the looming threat of a strike by dockworkers across US East Coast ports.

Looking at what has happened so far this year Frank says, “In ocean freight, we believe that one element of the stronger than expected demand in the last few months is a little bit of an early peak season. So, people started their restocking earlier, probably trying to avoid the natural peak season, but it also was largely impacted by the whole Red Sea situation, together with longer transit times, which have led some shippers to advance and move some of their inventories.”

While some shipments have been advanced DHL Global Forwarding doesn’t expect a huge drop off in demand as other seasonal factors such as China’s Golden Week coming into play.

Related:Supply chain bottlenecks ease as market balance returns

Now another disruption is looming on the horizon and that is the potential US East Coast port strike where talks about a new labour contract between unions and employers are at an impasse. The International Longshoremen Association (ILA) has made it clear that its members will strike coastwide from 1 October if no new agreement is reached and at the time of writing the two sides have not returned to the negotiating table.

Now given the timeframe some cargo that will be impacted by a dockworker strike from 1 October is already on its way to US East Coast ports. “For what is on the water, I think it's always difficult to impact because then you always depend on whether the vessel will either be rerouted or you can offload the container somewhere earlier and try to ship via a different mode,” Frank explains.

“I think in terms of contingency planning, we are rather working on it once in happens and what do we then with the future bookings and future shipments. How can we build up the contingency measures to use US West Coast ports and to use multimodal solutions, and so forth.”

^{Photo Credit: DHL Global Forwarding}

For customers they need think about where their shipments originate from and factor in supply chains and production planning into contingency plans.

One of the advantages that shipping with a company like DHL Global Forwarding has rather than direct with a shipping line is the range of choices it has when it comes to contingency planning

For the shipper that works with a particular shipping line, if for example in the case of the US East Coast port strike scenario they ship from a certain origin country to the US East Coast and the carrier has capacity problems and decides to blank a sailing or omit that particular port call the customer will end up missing their cargo for a week as most services are weekly.

“If you work with a forwarder like us, we can book on another shipping line. We can book on another sailing there is a lot more choice and a lot more flexibility,” he explains.

DHL Global Forwarding with an on-the-ground presence in over 150 countries also manages the complete end-to-end supply chain and not just the port-to-port segment. “So, managing that end-to-end [supply chain], the carriers cannot do that in all countries, whereas we can, as we have partners in all of the countries, we have people on-the-ground and we do customs clearance locally. In many places, we have warehouses, and hundreds of truckers  work with us from the first mile to the last mile.”

Similarly, DHL Global Forwarding is able to provide full visibility and transparency of the shipment throughout the supply chain lifecycle.

With the market becoming more used to frequent disruptions it has driven innovations in terms of solutions and according to Frank shippers are now more likely to turn to alternative solutions whereas in the past all parts of the supply chain would have simply lived with the conditions as they were.

For some shippers it maybe a viable option to switch mode of transport from sea to air freight or vice versa depending on the circumstance. Such a decision is dependent on factors such as rate differential between air and ocean freight, the capacity situation and transit times. Frank says there is no hard and fast rule as to when some companies would decide to make the switch between sea and air freight but rather it is driven by underlying conditions.