Special Feature
Supply chain challenges
It’s time to build resilience into your supply chain
Suppliers will face ongoing higher container rates, but they can do more to help themselves overcome supply chain issues, a webinar co-hosted by Toy World has heard.
T
he free event, attended by over 280 suppliers and retailers from across the UK and worldwide, also heard from a logistics expert who believes that, despite many suppliers feeling they were being held over a barrel with increasing freight costs, the shipping industry was not acting as a cartel. Entitled Supply Chains, Transportation and Toys: thoughts into the future, the session was a collaboration between Toy World, the British Toy & Hobby Association and The Toy Industries of Europe. Attendees heard from panellists Professor John D Mangan, who holds the chair in Logistics at the School of Engineering, Newcastle University and Iain Prince, who heads up KPMG’s Supply Chain team. Both pulled no punches about the challenges that still lie ahead, while also suggesting the worst of the volatility, poor service and huge price rises may at least be behind us. However, anyone hoping that shipping costs will return to pre-pandemic levels any time soon were soon disavowed of that notion: it was generally felt that container prices will fall slightly in 2022, but would settle quite a way above the low rates that suppliers enjoyed back in 2019. And it is a real worry for many suppliers: a survey carried out by KPMG of over 1,000 CEOs in
the retail and consumer sector globally, revealed that supply chain issues is one of the top three items on the agenda of the board, and also in the top three risks.
companies, the webinar heard that new shipping capacity would not be coming on stream until 2023, making any significant rebalancing in the ‘supply and demand’ equation unlikely next year.
“I know you are suffering, and you have suffered,” Prof Mangan told the webinar, adding that it had been a “perfect storm” earlier this year with the blockage of the Suez Canal by the Ever Given and port closures and congestion due to Covid-19.
Compounding the situation, Clarksons, which provides data for the shipping industry, has predicted container trade to grow by 6% in 2022.
He told the webinar: “Realistically, container rates are not going to drop down to pre-Covid levels of £1,000 - £2,000 per TEU. However, they probably won’t stay as high as they are; they’ll moderate down a bit next year.” Prof Mangan pointed out that the shipping sector is notoriously slow to change, and that global pressure for the logistics sector to reduce its carbon footprint would ultimately have to be funded by the companies using the shipping services, rather than the shippers themselves. “It’s a huge transition that will have to be funded and unfortunately when it comes to who funds it, the simple answer is it you – companies that use shipping services. The shipping industry isn’t a charity.” Reinforcing that the problems of increasing costs and unreliable service have affected all consumer goods importers, not just toy
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“The shipping industry is notoriously cyclical – new capacity comes and demand falls,” said Prof Mangan. “Containerisation is set to grow further – it has to – but we need to mitigate risk, and I think this has to start at supply chain level. We can’t just blame shipping. Shipping does what markets do – react to supply and demand – and our job as importers and exporters is to work around that.” Iain Prince added: “China is building some huge ships; capacity will increase in 2023/24 and they are actually starting to take control of their own logistics. Amazon is doing the same thing. Logistics is going to become a commodity, so everybody has got to watch that and change their 2022 budgets and plans.” He told the webinar how one major shipping line had seen its profit increase five-fold on the same revenue during the pandemic, despite providing patchy service to its customers. “It is not going to change for the next year or two,” he warned.
