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The highs and lows of supply and demand during the pandemic—of goods, labor and ships—created transportation bottlenecks and pricing surges, but shipping is beginning to get back to normal.
At the height of the shipping crisis in the first months of 2022, a record 109 container ships were waiting for a berth outside of the Port of Long Beach, said Peter Tirschwell, vice president, maritime, trade and supply chain at S&P Global Market Intelligence, during the United States Fashion Industry Association’s 2022 Apparel Importers Trade & Transportation Conference. Globally, 15 percent of ocean container capacity was idle due to backups, compared to about 2 percent in normal, pre-Covid times and 8 percent currently.
Freight rates have also stabilized after prices hit $30,000 and more per container traveling from Asia and the U.S.’s West Coast. Today, the cost of a container for this route is around $1,500.
“Even though on the surface it looks like the system is normalizing—freight rates coming down, vessel backups diminishing, there’s still vessel backups on the East Coast—there is now, going into this sort of post-Covid era, what my colleagues and I believe to be a higher level of risk,” Tirschwell said.
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Whereas before, there was a degree of reliability that allowed for models like just-in-time manufacturing, slimmer inventories and shorter lead times, Tirschwell noted that, “the level of confidence that exists in the system is now greatly damaged and diminished as a result of the experience that we’ve seen over the past couple of years.” This “lost faith” therefore has companies considering their inventory levels.
“If you’ve lost confidence in the supply chain, and if the supply chain has elongated by double...