North American Small and Medium-Sized Shippers Rethink Strategy for Supply Chain Price Spikes ahead of 2022.

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I would like to broadcast IINO san’s Logistics Radio.

Today, I’d like to talk about an article from the Wall Street Journal, “Smaller North American Shippers Are Taking a New Strategy Against Supply Chain Price Spikes.”

Daily Logistics Radio by IINO san in 28th Dec. 2021

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New Strategy for 2022

With the North American supply chain in disarray, small and medium-sized shippers are beginning to adopt new strategies for the coming year.

Some companies are storing goods in unused truck trailers, while others are trying to source products and raw materials near or within their home country, North America.

With the seasonal rush fading, strong freight demand and the supply-chain crunch are ongoing in U.S. and shipping rates are expected to climb further in 2022.

Companies are taking on new strategies to ease their supply-chain pain in the new year, the article reports.

Examples of New Strategy

Major companies, such as Home Depot and Wal-Mart, can use costly tactics such as chartering ships, but small and medium-sized companies have few resources to utilize, so each company is developing its own strategy.

For example, a company with an e-commerce site that sells pet-related products used to import most of its products from China.

However, doubling ocean shipping costs and rising air shipping costs squeezed profits, so it began buying jewelry and dog supplements from U.S. suppliers.

It has also begun to partner with a metal fabrication company in Mexico to ship some orders directly to customers.

Another example is a logistics company that has outgrown its 20,000 square feet of warehouse space and is reportedly looking for a semi-trailer to store goods on an unused truck dock.

The company is trying to use the semi-trailers as warehouses, which are not in good enough condition to be used for transportation and lack parts for repair.

If it can use the trailers, it will help keep him from “paying those crazy prices” for new warehouse space.

Another company headquartered in Canada said that the cost of shipping 40-foot container from Asia has roughly quadrupled from early 2020 to this summer.

It has said it will implement price increases for its customers, and others have said, “Price increases are definitely a possibility.”

The company recently paid about USD30,000 for shipping a single ocean container, including an added charge for delays in handling the box.

That’s a terribly high price compared to the approximately USD5,000 before the Corona pandemic.

Previously, prices were revised once a year, but now they need to be done every quarter.

Finally, an apparel and accessories wholesaler that transports more than 100,000 individual packages a day is focused on “making ourselves a very attractive shipper” so that it can move goods as needed.

That means getting truck drivers in and out of the company’s facilities quickly, and not tying up carriers’ equipment. The company preloads trailers to minimize wait times and aims to get drivers back on the road in 30 minutes or less.

That’s how important a fast supply chain has become.

In 2022, Attention the Move of Shippers

From this article, I think the key question is how much more domestic sourcing in North America and sourcing from Mexico will occur next year. Maybe there will be more investment in Mexico.

If a well-capitalized company were to use bulk vessels for wholesaling, I think the disruptions in the supply chain would calm down a bit. In this case, bulk charters and SOC containers will be required, but the possibility is not zero.

There is also a shortage of warehouses, so the demand for warehouses in Mexico may also be rising.

It will be interesting to see what moves North American shippers will take.

If they run their business the same way they did this year, they will have to continue paying high transportation costs next year, and in order to avoid that, some shippers will take a different course of action from this year.

I will continue to check for information on movements in North America.