Q4 Weekly Webinar Series 10/27/2021 | Sea Freight disruptions and China Power Crisis

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Sea Freight Disruptions

Background

Watch this video:    • Sea Freight Disruptions 2021 | High c...  
Sea freight price index: https://www.drewry.co.uk/supply-chain...

What led to this?

Kind of COVID, but not exactly directly.

After COVID “kind of started recovering”, Ecommerce and demand for products went way up in the US and EU..which much more demand for products from China

Same time - China recovered way faster, and production started going into overdrive to meet the demand

Tons of containers going via sea freight to the US / EU, BUT not enough goods coming back

Containers were going into the US, and literally just getting left there
Literally caused a shortage of empty containers, which drove up the price a lot, especially with increasing demand

Impacts

Normal years, can ship out from shenzhen by mid November (even sometimes a bit later) and still make it in time to US for Xmas shipping cutoffs

This year: delays have caused it so that it is ALREADY too late to be confident to ship out in time to arrive in the US for Xmas fulfillment (end of Oct)

What it means for you (assuming you can fulfill from China)

First of all: don't depend on sea freight for Q4 starting now (end of Oct) for Xmas delivery

Good news:

Doesn't really affect air freight / direct china fulfillment (except maybe higher cost increases because of additional demand)

The consumer fear means that Xmas shopping season is longer than usual

Media is already talking about buying NOW before BFCM...which leans holiday peak should start earlier - good for anyone who can actually sell then

China fulfilled brands can sell far later than local fulfilled if they are out of stock...can ship as late as early / mid dec from china, depending on shipping line

Consider using china fulfillment even if you are locally fulfilled right now if you’re concerned about stock

China Power Crisis

Background

Article for reference:
https://www.bbc.com/news/business-587...

Context:
For a while now, China made it a goal to be more Green, which is good!
Biggest thing is it made it target to reduce / stop coal production, and coal energy generation

The idea though was that it would be replaced by other forms of energy

The problem:

Way more production / industrial activity than expected post COVID - these take a TON of energy, which made it so that energy projections were way off

Energy prices in China are strictly controlled by the govt (techically usually a good thing). But supply has decreased in terms of COAL (which means higher coal prices vs demand).

Coal power plants are LITERALLY losing money by operating, because energy prices are held stable, which means supply of energy has actually decreased.

Usually - When demand goes up, supply goes down, prices should go up
BUT - when prices can’t go up, some things is going to give (probably not demand).

Impacts

Starting before Oct, many industrial / production regions have limited energy usage.

Targeted factories, raw materials producers, industrial centers because they use the most energy.

So what happened:

Some factories could only work ~2 days a week (example)
Some could only work during night times
Some couldn’t work at all

Impacts:

Slower production for some products

Higher raw materials prices, which drives up the costs of production and therefore cogs as well

There was a huge scare that by now the whole supply chain would collapse

Kind of positive:

Factories have seen much lower demand recently (compared to usual Q4) BECAUSE a lot of freight orders were getting cancelled, or not getting placed...due to freight issues, this actually eases demand

Factories have started to figure it out...updated their work processes, working overtime, over night, power generators, etc.

Generally good news:

China fulfillment itself shouldn’t be at a high risk of impact.

Fulfillment/logistics is very low energy-intensive compared to other industrial factors.

Yunexpress has their own business park .

What it means for you
Don’t worry too much, it’s way better than we expected in the worse case
However, even more important to plan ahead for Q4!

You want to get ahead of the curve in planning with your factories, so they prioritize you if there are production issues.

PLAN FOR STOCK if you want to scale this Q4

Join us every week Wednesday 11AM US Eastern time through Q4 for continued regular webinars

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