It’s been a turbulent year in freight.
To get you ready to succeed in 2021, we’re taking a look at what happened and laying out what lessons we’ve learned.
Whether you shipped internationally for the first time in 2020, or were a seasoned importer before COVID-19 hit the world stage, chances are you’ve experienced a full container load of freight volatility this year.
We’ve been hearing from our users about long delays, high costs, and uncertainty about timing — and this may not change in early 2021. Understanding why this is happening will help you strategize how to avoid and overcome challenges.
So, without further ado, here are 20 things that happened in freight in 2020 to disrupt supply chains.
20 times that coronavirus disrupted freight and supply chains in 2020
- With the first rumors of an emerging virus in China, in January 2020 passenger airlines start suspending flights to and from specific locations in China.
- The Chinese government extends the Chinese New Year holiday and shutters some businesses in an effort to control the spread of the disease. Severe restrictions on ground transport and a halt on manufacturing disrupt global supply chains.
- By March 2020, a global emergency is declared and passenger air travel worldwide grinds to a halt, leading to seriously limited shipping capacity. The lack of bellyhold space causes a capacity crunch that persists throughout the year.
- While China begins rolling back restrictions and reopening manufacturing, newly implemented safety protocols and lockdowns cause long delays at ports — and high associated fees for importers.
- As Europe and North America shutter stores and shelter in place, an anticipated early peak season in ocean freight changes course with carriers blanking sailings in an effort to curb overcapacity and crashing freight rates. In response, importers cancel, divert, and even abandon shipments.
- With massive disruptions, backlogs, and blanked sailings in ocean freight, air cargo rates out of China to Europe and North America start to climb. These costs make shipping more expensive for importers worldwide.
- Ground transport logistics is disrupted by lockdowns and closures, leading to mass trucking layoffs (most have since been rehired). This impact also delays container transport, causing shortages.
- In mid-March, with high demand for essential goods and PPE, Amazon reduces and eventually halts third party sellers from sending non-essential items directly to Amazon’s FBA warehouses. The volume of FBA shipments to Amazon drops by 50% week over week.
- Importers diversify modes and suppliers to mitigate delays and blanked sailings. Plus, domestic lockdowns and shifting Amazon regulations mean importers need to split goods between multiple warehouses and distribution centers.
- Around April, Customs and Border Protection defers certain duties to qualifying businesses, easing the financial pressure of the pandemic. But tariffs continue to raise costs for importers.
- The freight industry’s hand in managing the COVID-19 pandemic extends beyond transporting essential goods, PPE, and (thankfully) the vaccine — hospitals made from shipping containers ease pressure on overtaxed medical facilities.
- Airlines convert passenger planes by removing seats to transport lightweight boxes containing medical equipment and PPE.
- With brick and mortar stores shuttered indefinitely, e-commerce experiences accelerated growth. At its peak, online Cyber Monday sales are up 70% year over year.
- From January to May 2020, air rates out of China increase more than 400% — ocean rates remain nearly unchanged (but not for long!).
- With 16% of scheduled Asia-US shipping capacity blanked in June, demand for ocean freight quickly outpaces supply. This pushes ocean rates up nearly 60% from the end of May to the end of June on China to US West Coast lanes.
- Throughout the summer, ocean rates continue climbing to extreme heights. Reasons for the surge include high demand for PPE, high volumes as US businesses easing out of lockdowns, moving online, or restocking inventories, anticipation of new tariffs in the trade war (remember that?), and (of course) coronavirus disruptions.
- By September, a record-breaking number of consecutive general rate increases leads governments and regulators to cap ocean freight prices and limit canceled sailings on China-US lanes. Ocean freight rates remain very inflated.
- A vaccine is around the corner in October as airlines earmark cargo capacity for rollout, leading to less availability for importers and driving prices even higher.
- Peak volumes of Chinese goods headed to the US since July lead to congestion at US ports and significant delays returning empty containers to Asia. The equipment shortages cause expensive delays for shippers and even inspire ‘container mafias’ that hoard equipment and sell it at exorbitant markups.
- As importers rush to book air cargo and guarantee delivery in time for holiday delivery, air rates increase by almost 100% between October-December 2020 while capacity is down 40% year over year. By the end of the year, ocean freight rates also start climbing again despite the involvement of regulators. Industry experts predict that congestion, delays, equipment shortages and high rates will likely persist through the spring of 2021.
For importers, ongoing volatility makes it important to stay on top of rates and understand the total cost of shipping.
Just take a look at the blue line to get an idea of how high freight rates are these days:
What to expect from freight in 2021 and how to prepare
Freight has faced crises before, most recently the 2008 Financial Crisis. Revenue plunged as carriers struggled with overhanging capacity and plummeting demand, and the industry has recovered sluggishly.
When the pandemic hit, carriers were quick to protect themselves from the fallout by limiting capacity and imposing successive GRIs to cover skyrocketing costs.
The result of these emergency measures has been a frenetic freight market with record high rates, severe equipment shortages, and long delays (and added fees).
Plus, with lockdowns paralyzing ports and ground shipping, 2020 has been a challenge to small business importers (to put it really mildly).
So, will 2021 look any different? The short answer is not just yet.
The growth of e-commerce has been accelerated by at least five years with shuttered storefronts pushing retailers to pivot and pushing freight volumes up dramatically. The products that people are buying have also changed with the pandemic.
Staying agile is vital in 2021.
When it comes to shipping, being prepared is the difference between profit and loss.
Freight rates are still elevated, with premiums to guarantee space, and lead time remains unpredictable as a result of equipment shortages, high volumes, and coronavirus lockdowns.
While we’re starting to see the light at the end of the tunnel, volatility is rolling over into the new year. One way to get ahead and secure supply chain integrity is to leverage a digital freight platform for shipping.
The ability to compare carriers and rates, purchase additional services, and access ongoing support throughout the shipping process will ease friction and free you up to grow your business.
We can help.
Ready to book your first shipment of 2021?