The top news impacting your supply chain right now – January 2024 Update

The top news impacting your supply chain right now – January 2024 Update 150 150 Transmodal

Here are some of the top supply chain news stories happening right now.

The new year ushered in some big changes for the EU—the inception of the new European Union’s Emissions Trading System (EUETS). With the new regulations in place, vessels that stop at any EU port will need to pay for their carbon emissions with EU Allowances (EUAs). This is happening despite pushback from several shipping companies who have expressed their concern about the high costs that are attached to this new initiative. Some companies are reporting a price tag of about $200,000 per voyage, depending on the vessel, so their concerns are not without warrant.

Our take: The carrier surcharge amounts will likely change over time, so it’s important to continually watch these additional costs to understand their impact.

Read more here.

In other parts of the world, maritime shippers are dealing with a different sort of problem, but one just as costly. The ongoing violence in the Red Sea and the continuing drought in Panama are making things difficult for ocean carriers. In December, A.P. Moller-Maersk and Hapag Lloyd announced they were halting the movement of cargo through the Red Sea and Gulf of Aden because of escalating Houthi violence. In some but not all cases, vessels are being rerouted around the Cape of Good Hope. And the extreme drought in Panama forced the Authority to take measures to preserve water, leading to long delays for vessels waiting without reservations. All of these diversions and delays mean the average length of voyages is exponentially increasing, and spot rates are continually getting pushed up.

Our take: The situation is NOT getting better at this point. Work closely with your forwarder to make sure any additional costs and service delays are understood as clearly as possible. Things are very fluid in the region right now.

Read more here.

And finally, the industry is revisiting its Just-in-time (JIT) model but with a bit of a twist. With the onset of the pandemic and the turmoil it introduced to supply chains, the vulnerabilities of the concept became apparent, and a new model emerged — Just-in-case (JIC). One study from 2022 indicated that 64% of the companies surveyed were embracing JIC. With this model, instead of waiting until the last moment to order stock, these companies were overstocking inventory, so they’d have goods on hand just in case. In the last year, the folly of that model has become apparent, and supply chain gurus have again turned their attention back to JIT. Except this time around, instead of building up huge inventories, companies are buffering their inventory with elevated safety stock levels. When you factor in issues like the warehousing costs excess inventory brings, this new approach makes much more sense.

Our take: Supply chain disruption has become the norm since the pandemic. Being flexible with transportation plans and inventory management should be a priority for importers and requires close communication and coordination with your transportation partners.

Read more here

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I hope you find this information helpful.