One often underappreciated aspect of the international logistics industry is the importance of passenger airlines to international air freight capacity. In recent years, about 50% of all air freight was transported in the belly of passenger jets, increasing to 80% for transatlantic air freight. With air travel down by up to 96% and continued uncertainty, logistics companies are working to increase capacity but a Seabury Global Capacity Report estimated that global air capacity still dropped by 35% from last year, causing significant price increases, especially coming from China.
In response, manufacturers and logistics companies will need to rely more on freighter flights to make up for the capacity with some companies bringing previously retired planes back into service. Passenger airlines are also able to help but their limited capacity isn’t ideal long term. According to the Wall Street Journal, the US government is expected to issue guidelines for how US air carriers could convert their passenger jets to hold cargo which would undoubtedly help as well.
While most large capacity air freight needs are committed through most of May, manufacturers who wish to continue using air are encouraged to work closely with their freight forwarder and sales/demand planners to try and break up shipments as smaller shipments are currently easier to move.
As air freight costs spike, many manufacturers will need to utilize ocean freight more, and for some, this will be the first time. Fast ocean services, such as Full Container Load (FCL) and Less Than Container Load (LCL) may be good options as they allow for easier movement once through customs. It’s also important to note that since domestic ground shipments around the world continue to post record breaking lead times as people continue to stay home, some ports that were previously too far by land may be ideal, more affordable alternatives for the time being.
It will also be important for manufacturers to keep an eye on the number of blank sailings. Blank sailings occur when there is a much larger quantity of goods consistently, or rapidly, moving in one direction. Therefore, ships will need to be returned to the original port without stopping for pick ups, leading to a nearly doubling in costs per shipment. While this typically happens to some extent during different holidays throughout the year, the fact that COVID-19 struck during Chinese New Year has only multiplied the problem.
Asia Actual has commercial experts throughout Asia that can assist manufacturers navigate the ongoing logistics challenges, clear customs, store additional quantity in our warehouses and/or provide direct fulfillment