Page 19 - Logistics News - September - October 2021

S UP P LY CH AIN MAN A GEMENT

to transport the cargo arriving at ports, and when drivers who still only see a failing supply chain, delayed deliveries to clients,
contract COVID-19 can no longer access harbour terminals, penalties, lack of stock and lost sales. BIL says no matter how
the supply chain is further disrupted. justified or valid the LSP’s reasons, the despairing customer
wants solutions, not excuses. There is a solution, however.
It is no secret that the US is one of the world’s biggest
consumer markets, so a boom in shipping volumes is According to BIL, these tensions can be mitigated and
inexorably tied into America’s consumer spend. However, even avoided, but for that to happen, there needs to be clarity
the country is notorious for truck driver strikes and rail and between the LSP and customer from the outset. It starts with
ramp delays, to the point that turnaround of containers often the take-on of the Scope of Work (SOW)/service contract,
exceeds 60 days. The costs involved are also astronomical. including a thorough interrogation of the customer’s business
model and specifically the supply chain.
Ship charter rates have multiplied in some cases by
anything upwards of 300 percent. Short-term charter According to BIL, there are three important questions
rates of between two and three months for a 5,000 TEU that the customer and the LSP must jointly and honestly
(20-foot equivalent unit) ship have topped US$135,000 interrogate, namely:
(R1.9 million) a day. Longer term charters (3-5 years) are • Is the customer’s business model dependent on
reaching US$50,000 (R727,000) a day. Currently, carriers are imports and/or exports for the survival of the
posting record financial results, which places huge pressure business? If the answer is yes, meaning there is no
on forwarders in the supply chain to manage their clients’ alternative local supply, then the answers to question 2 and
expectations. 3 become vital.
• Does the customer have a robust international supply
In the view of Bidvest International Logistics (BIL), where chain that will sustain its business through 2021
lead times were previously seven days door-to-door, 21 days and beyond? If the answer is yes, test it by considering
are now recommended to accommodate unexpected delays. multiple disruptive ‘What if’ scenarios. If the answer is still
However, LSPs should expect at least some blowback. Because yes, then proceed in overcoming the challenges or draining
customers are facing their own pressures, perceptions of LSP the swamp, so to speak. If the answer is ever no, remember
service failures will mount when supply agreements don’t the end objective is to drain the swamp. It may therefore be
go according to plan. The key, BIL says, is knowing how to time for a thorough review of the customer’s supply chain.
approach such situations. Consider all alternative options to keep the supply chain
moving through disruptive global events.
Among the options available to LSPs is drawing attention • In the event of an unanticipated disaster or disruptive
to Standard Trading Conditions, or declaring force majeure incident, are all parties unambiguously clear on the
if such a clause is included in the service contract. It could be point where risk transfers from the seller to the
pointed out, for example, that the European summer holidays buyer? In the event of a maritime disaster or disruptive
are coming to an end, or that China is celebrating its annual incident, the importance of this question lies in the correct
Autumn Festival followed by Golden Week at the beginning use and understanding of the international commercial
of October, during which time most companies and factories terms (Incoterms) rules, specifically the point where the
shut down and many carriers announce blank sailings. The seller has fulfilled its final obligation under the sales contract
dearth of manufacturing during this period automatically and risk has transferred from seller to buyer. It also pertains
means that sale days like Black Friday in South Africa will be to understanding the obligations of the merchant as defined
affected. in the transport document to the ocean carrier/consignor
(as contracting party) and air carrier.
With most carriers already fully booked due to limited
space and Chinese ports experiencing backlogs due to the BIL says there is no question the past 18 months
effects of typhoons and COVID-19 outbreaks, it stands to have been daunting and apart from 2008/9, businesses
reason that Standard Trading Conditions will be severely dependent on international supply chains have rarely seen L O GI S T I CS NEWS
hampered. such unpredictable consequences arising from disruptive
global events. But the key to success in these times is and will
Yet, as much as these factors may be true, customers will continue to be resilience and knowing how to achieve it. •

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