Four Things To Know About Shipping Cargo Across The Planet
If you run a US or Canadian company that needs manufacturing help, you may be tempted to source production in Asia. The costs of manufacturing in Asia aren’t always the lowest (in fact, Mexican manufacturing is often the least expensive option for North American companies). Still, there are established manufacturers in Asia that deliver quality and value.
However, before your company contracts with a manufacturer in Asia, consider the following:
- Ocean-going cargo isn’t as reliable as truck freight, the US Postal Service or Canada Post.
- As the list of hair-raising anecdotes below will show, shipping cargo across the world via container ship can be perilous.
1. Cargo Really Is Lost At Sea
Believe it or not, hundreds of containers of cargo are lost at sea every year. According to the World Shipping Council, about 1,382 containers are lost overboard every year. To be fair to the shipping industry, this represents a small percentage of the containers shipped (millions upon millions of containers are shipped annually).
Of course, you can buy insurance, but that will add to your invoice and eat into margins. In manufacturing, where every penny matters, the costs will add up a lot.
2. Labor Challenges Can Delay Delivery
For US companies, it’s important to understand the impact that dockworkers can have on shipping. Dockworkers in the US are largely unionized, and labor negotiations are (like a lot of other industries) often difficult. The dockworker labor disputes on both the west coast and east coast over the past decade have illustrated just how damaging these disputes can be to schedules and profits. Sometimes, walkouts and slowdowns can delay cargo for weeks.
Not to mention, other factors may delay cargo shipments, too. A good example is the famous Suez Canal obstruction. This situation caused shipment delays and shortages around the world. Supply chain crises are very common. If you regularly ship cargo from across the world, you’ll run into shipping delays sooner or later.
The worst part is that these delays can often trigger surprise “demurrage” or “detention” charges, where either the cargo shipping company or trucking company will levy fines for using their container or delaying their trucks longer than expected.
3. Shipping Companies That Can’t Afford Docking Fees
In this article, we discussed the troubling story of Hanjin. In 2017, the shipping giant filed for bankruptcy and stranded nearly $14 billion in cargo at sea for weeks. The reality is that Hanjin wasn’t the only shipping company struggling to make ends meet. The industry is bleeding red ink almost across the board. The solution is for shipping companies to consolidate and scrap vessels. That’s why shipping costs are rising.
The question is, what happens when a shipping company can’t attract a buyer, and can’t make a profit? Will they file for bankruptcy? And will your company suffer as a result?
4. Shipping Rates Are Going Up
Did you know that nearly half the world’s shipping companies are expected to disappear as a result of industry consolidation? Shipping costs have been increasing in the recent years, and they’re not stopping anytime soon.
The collapse of Hanjin shipping, for example, led to a 40% increase in rates for routes previously served by Hanjin. Are 40% shipping cost increases in store across the industry, after a wave of consolidation? Only time will tell. If you’re locked in a contract with an overseas manufacturer, you may have no choice but to pay those astronomical shipping costs as they get higher and higher.
Summing Up
There’s more to choosing a manufacturer than a simple cost analysis. However, the increasing costs of oceangoing cargo cast a shadow over Asian manufacturing.
Toss in the fact that shorter supply chains allow for better cash flow management, smaller (and more frequent) shipments, easier site visits, and it’s easy to argue that contracting a manufacturer in Mexico (like Intran – cough) is a smart idea.