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Even as stakeholders struggle to keep their collective heads above water while dealing with the daily challenges of the “new normal” of an unpredictable supply chain, they must also anticipate and plan for evolving and new disruptors that may await them in the year ahead.

In its year-end Logistics Executive Briefing, Drewry supply chain analysts highlighted “four potential new disruptors shipping and logistics management teams should anticipate and prepare for in 2022.”

Here, we dig into each by providing a snapshot of the potential disruptors, current status where available, and related insights from various experts.

Potential Disruptor #1: Another dispute between the ILWU union and US West Coast port employers

Drewry analysts predict that if a dispute occurs, “This will push back by weeks or even months the reduction of acute congestion at US West Coast ports, with ripple effects on global carriers’ schedules and on the ability of ports in Asia to handle unscheduled ships or bunched ships affected by problems in the US.”

They’re referring to the contract negotiations that are coming up between the International Longshore and Warehouse Union (ILWU)—which represents dockworkers—and the Pacific Maritime Association (PMA)—which represents 70 member companies that include cargo carriers and terminal operators for West Coast ports.

In November of last year, the PMA asked for a year’s extension of the current contract that expires in July 2022, but the ILWU turned down the request—citing a previous 3-yr extension agreed upon in 2019.

The last time the two negotiated a contract, the contentious dynamics resulted in significant disruptions at the ports, which would obviously be the last thing shippers need in light of current and ongoing challenges.

According to contracting firm NYSHEX, predictions among industry stakeholders about the upcoming negotiations vary: “Some say that these negotiations could all fizzle out with a compromise on both sides, others believe that they could have short-term disruptive effects, and some are leveraging that they change the landscape of ocean commerce and shipper strategy for an extended period.”

NYSHEX also describes some of the dynamics that will likely be involved: “The anticipated topics of discussion and potential changes will span from technology and automation to attempting to alleviate labor shortages and port congestion. While carriers may seek settlement to avoid further conflict, there is a potential for standstill and that negotiations will be drawn out at the expense of the industry.”

Potential Disruptor #2: The pandemic weakening additional parts of the global container shipping system

Drewry says the zero-tolerance COVID policy currently in place in China “makes it particularly likely to shut down, and without prior warning, more/secondary ports, more barge operations and more feeder operations as new cases arise. Further lockdown measures in other countries, triggered by new Covid variants or pandemic waves also cannot be ruled out.”

However, in other parts of the world, there are promising signs of a sliver of light at the end of the COVID-19 tunnel.

In the U.S., several states are in the process of lifting mask mandates to various degrees—including for children in schools.

Around the globe, a number of countries have been opening up to embrace a return to some semblance of normal.

And according to CNBC reporting, Michael Ryan, executive director of the WHO Health Emergencies Programme, told a panel at the recent World Economic Forum’s virtual Davos Agenda event that it may be possible to end the COVID public health emergency this year.

Recent WHO data supports his optimism—indicating that for the week ending February 6th, there was a 17% decrease in new COVID-19 cases globally compared to the week prior.

Regionally, the WHO notes an increase in new cases in the Eastern Mediterranean only, with a 36% increase from the week prior. However, in all other WHO regions, the number of new cases for the week dropped compared to the previous week:

  • Europe—down 7%

  • Americas—down 36%

  • South-East Asia—down 32%

  • Western Pacific—down 8%

  • Africa—down 22%

At the country level, WHO data indicates that compared to data for the previous week, some countries experienced a big decrease in new cases, some had increases, and some stayed the same:

  • U.S.—50% decrease

  • France—26% decrease

  • Germany—22% increase

  • Brazil—similar to the previous week’s figures

  • India—41% decrease

How will all this affect the supply chain?

That will depend upon who gets what from where and whether the ports and other access points involved maintain their rigid COVID-19 rules or opt for loosening restrictions in the weeks and months ahead.

Potential Disruptor #3: Flash points between the ocean carrier industry and the forwarder/NVO sector

According to Drewry, “We are starting to see that some ocean carriers are withdrawing from NVOCC relationships and others are making it difficult for NVOs to offer carrier-like fixed contract rates to shippers under preferential ‘named account’ terms agreed in advance with the ocean carriers.”

Drewry’s analysts note that since the start of the pandemic, both the role and pricing strategies of NVOCCs have changed, “with many now offering shorter term and varying premium rate levels in return for finding space and equipment solutions.”

For more on some of the dynamics involved that led to this shift, please see Container Exchange’s October 2020 post, “Pandemic helped NVOs dominate the trans-Pacific market.”

Potential Disruptor #4: Difficulties dealing with MQCs and widespread disputes about MQCs

Drewry analysts predict that beneficial cargo owners (BCOs) across the board face a “new reality of the market” this year: “…you cannot expect to ship 10 containers one week, 50 containers the next week, and hope to get 100% capacity for both weekly volumes. Carriers and NVOs are already telling BCOs that their capacity in 2022 will be the contractual Minimum Quantity Commitment [MQC] per annum ‘divided by 52’.”

They said that in addition to the capacity constraints commonly faced in 2021, shippers will have an additional constraint in 2022: “…full or high payment of the freight will be due when the capacity is not used by the shipper.”

Since Drewry doesn’t feel that most BCOs are ready to manage “this type of volume commitment,” the analysts predict that in 2022, disputes related to this issue will be “about how to deal with excess volume above weekly MQC and deficit volume below weekly MQC and about associated penalty clauses.”

In the following March 2021 Freightwaves video, “Contracting, the good, the bad, & the ugly,” Steve Ferreira, CEO, Ocean Audit Inc, chats with Stephanie Loomis, VP of FCL Product, Vanguard Logistics. Although their discussion covers 2021 contracting dynamics, some of the analysis may also be applicable to 2022.

Proactive planning

In light of the potential disruptions related to the four issues described, Drewry analysts offer a “shortlist of required plans” to help shippers develop a proactive strategy for 2022:

  • Optimize operations—“Control better what you can control” by “improving MQC management processes, volume forecasting and communication of your forecasts to carriers, etc…”

  • Develop a contingency plan—in case West Coast ports in the U.S. are negatively impacted by the ILWU contract negotiations.

  • Get ready for the next crisis—by prioritizing relationships with “the right logistics providers” and strengthening relationships with carriers and optimizing “business continuity plans.”

  • Reduce exposure to “super-inflated container shipping costs”—by reviewing “your supply chain and your transport networks.”

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