Posted on November 17, 2021
Self-reporting of the major ocean carriers forecast that the industry is posting over $200B in profits. This massive positive windfall is double the profit made by carriers over the past 20 years combined. A single year of record profits offsets twenty years of poor margins for a struggling industry. Maersk, the world’s largest container shipping company, reported its best quarter in 117 years, posting a $5.9B profit for Q3 on $16.6B in sales.
However, none of this windfall will help to solve the supply chain issues. The funds will not line the pockets of the truck drivers, fix the chassis coordination issues, or streamline port operations. The top fifteen ocean carriers are owned by non-US international conglomerates dominated by Chinese, Danish, French, Korean, and Middle East interests. The Biden infrastructure plan to spend $17B on the United States ports will get no help from the carriers.
Inflation, currently at 6% in the United States, is climbing. Increased logistics costs are a major factor. Yet, retail shelves are increasingly empty. Ships continue to hold in the west coast harbors of LA and Long Beach, yet the west coast warehouses are full. Inventories in the chemical industry are at record lows: a forerunner of bad days ahead. (The health of all sectors is dependent on the chemical industry.) Hazardous chemical freight is the most likely to get “rolled” at the dock. (Sitting waiting for a confirmed booking.) While we will recover quickly in retail (moving from painful shortages to a glut of inventory), the chemical industry—sitting four and five layers back in the supply chain—takes longer to recover. My take? The value chain supporting all industries is sick, requiring a leadership step-change in thinking.
For business leaders, the chickens are coming to roost. On the one hand, we should celebrate the fact that the aggregate industry moved 38% more freight in 2021 when compared to 2019. On the other hand, we must take responsibility for supply chain leaders failing to deliver a resilient supply chain equal to the COVID-19 challenges.
What can we learn? While many are scratching their heads and pointing fingers at the compounding of issues, I hope that business leaders take a hard look at the current state and accept their part in the failure.
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