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. While 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), 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 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

cargo containers stacked

Believe it or not, thousands of containers of cargo are lost at sea every year. According to Ship-Technology.com, as many as 10,000 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.

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. Recent dockworker labor disputes in both Los Angeles and New York have illustrated just how damaging these disputes can be to schedules and profits. Sometimes, walkouts and slowdowns can delay cargo for weeks.

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 another article, we talked about the troubling story of Hanjin, which filed bankruptcy and stranded nearly $14 billion in cargo at sea for weeks. The reality is that Hanjin isn’t the only shipping company that’s struggling to make ends meet. The industry is bleeding red ink almost across the board, and the solution is for shipping companies to consolidate and scrap vessels.

The question is, if a shipping company can’t attract a buyer, and can’t make a profit, will they file bankruptcy? And will your company suffer as a result?

4. Shipping Rates Are Going Up

cargo containers on ship

Playing off our previous point, consider this: nearly half the world’s shipping companies are expected to disappear as a result of industry consolidation. When this happens, shipping costs are only going to go up. In the words of Logistics Management magazine, ocean shipping costs are expected to surge in 2017 from their all-time lows in 2016. 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?

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.