Throughout the first half of 2020, demand for most goods plummeted as economies worldwide went into lockdown. Shipments were canceled, manufacturing capacity was cut, and workers everywhere were displaced. 

From a logistics perspective, restarting the manufacturing machine after the lockdown turned out to be quite difficult. The complex system that moves raw materials and finished products around the globe requires predictability and precision. Both had been lost.

In 2021, with the world having just survived the COVID pandemic, the problems plaguing global supply chain management had only just begun. Container markets, shipping routes, ports, air cargo, trucking lines, railways, and even warehouses had all been fractured and were in danger of falling even further apart. The result was shortages of key manufacturing components, order backlogs, delivery delay, and a spike in transportation costs and consumer prices.

Adding to that, Russia’s invasion of Ukraine complicated the recovery even more. Fears of an economic fallout discouraged the consumer view of international trade and freight transport. Although rates continued to stabilize at record levels in Q2 2022, they inevitably began declining in Q3 2022 before a gradual descent as we moved closer to the end of the year. 

So why the focus on shipping, if the whole proverbial house was on fire? Because over the next 2 years, it’s recovery was emblematic of the recovery of all supply chain management components.

With time, shipping rates began to recover, indicating pre-Covid levels. Lower demand led to fewer shipments, particularly in the US and European countries. Excess in ocean freight shipping led to less congestion, vessel backlogs and applied downward pressure on prices, contributing to the decline in inflation.

We are now at a point where the global sea freight Forwarding market is estimated to reach USD 92 Billion by 2029, growing at a CAGR of 2.42%.

How did the industry recover? A number of factors have made themselves clear.

First is a decline in shipping costs. In the first nine months of 2021, the cost to ship a container from China to the US was over $20,000. According to Freightos, a renowned player in the industry, costs to ship a container on the China-US route has dropped to less than $1,200 in an attempt to attract higher volumes. Current rates are indicative of a change in supply chain strategy that favors the manufacturers and retailers, not the shippers. Cargo movement is expected to be smoother and considerably faster than has been the case in the last 2 years.

The cost of containers has also dropped drastically. While a 40' high cube container, the type often seen on giant tankers, could be purchased for around $2,000 pre-pandemic, the price peaked at $6,000 in 2021. The demand for goods decreased, and prices have now fallen back to under $2,000.

Another legacy from the Covid pandemic was the development of the Just In Case inventory management strategy. Whereas companies have typically maintained minimum inventory stocks, the sudden surge in consumer demand left many unable to fulfill orders, as replenishments from overseas were no longer forthcoming. As a result, companies have started holding high levels of inventory ‘Just In Case’ there are unforeseen delays in the supply process. This is feasible as the opportunity costs of lost sales were considerably higher than the cost of holding excess inventory.  The efficiency of sea freight then becomes favorable. In the event that companies need to move unexpectedly, smaller shipments are required, and they can be grouped together with other different cargo to fill a container, allowing for cost-sharing of the transportation services. Larger cargo can fill one or more containers, offering shippers unmatched bulk options.

As a company in global logistics, it goes without saying that sea freight is not the only mode of transporting products at one’s disposal, but with cost effectiveness being seen as a major factor in company direction, comparisons must be made. How does sea freight’s resurrection compare to that of road freight? Truck rates have also declined, according to data from Internet Truckstop, hauling flatbed rates in the US peaked at $3.50 per mile in June 2022 but are now under $2.50.

The same trend has occurred with air freight. The overall drop in demand for goods, coinciding with normalized jet fuel prices, has helped ease air freight costs.

It ultimately comes down to the cost of transportation, with some estimates showing that ocean freight shipping costs are generally four to six times less expensive than air.

At Neeco, our focus on a global market has allowed us to implement some of the above strategies by default. Original Equipment Manufacturers have begun focusing on Nearshoring, the practice of relocating critical manufacturing components closer to demand, and with us they have found a partner who can take on the responsibility of transporting to the more distant and overseas markets. By maintaining a truly global warehousing system, you allay the OEM’s fears of long-distance supply chain disruption, and have the ability to deliver to remote locations, they may not have the capacity for.

As we delve further into effective transportation, the more affordable shipping costs have made it more practical to focus on sea freight. In Q1 and Q2 2023, Neeco managed successive Full Container Load (FCL) shipments from warehouses on three continents, and we are aiming to increase shipments, as demand continues to rise.

In conclusion, the logistics landscape is very different compared to just 2 years ago. Every component of supply chain management has improved. However, sea freight has emerged as the single most viable option for companies looking to penetrate the global market. Costs, effectiveness, safety, and even environmental friendliness are all major advantages that should not be ignored when combating disruption, especially in light of the increase in natural disasters and wars raging throughout our world at the moment.

At Neeco, our focus is on delivering the highest possible level of value-added services anywhere and within the shortest delivery time possible. Thanks to the resurrection of sea freight, transporting your goods by ocean and other waterways has never looked so appealing.