Do you know how your goods get from factory to fulfillment center?
Or are some parts of your supply chain a bit…opaque?
We get it, the global supply chain can be a tough topic to tackle, especially when you’re also trying to develop a new widget and expand your presence in a key market — all while keeping the lights on.
Some days it’s enough to know your shipment is on a boat, somewhere, and that you’ll maybe get an email when it arrives at port. But what about the days when that’s not enough?
Having an understanding of the global supply chain and how your company fits into it is the arrow in the quiver of the modern ecommerce business leader.
Without this knowledge, you might be leaving your goods in the hands of as many as 20 outside vendors and partners to ensure they get delivered on time — and you may not even know the names of all those vendors.
In today’s hyper-connected world, freight forwarding can seem like a lone holdout. While your customers can track their parcels from their smartphones down to the block the delivery truck is on, the best you can hope for is a phone call when the ship leaves port and one when it arrives on the other side of the world.
Our ability to ship, store, and trade goods remains fragmented — and key logistics data remains siloed.
Combining this pre-existing state of freight with the events of the past two-plus years of pandemic-related disruptions and grasping the micro- and macro-dynamics becomes even harder.
We want you to be sure you see the reality of how fragile freight shipping can be and how to prepare for a resilient supply chain that gives you options.
Before we look into some of those options, we’d like to go a bit deeper into the current freight cycle, where the delays came from, what the impact of the pandemic has been, and what you can do about it.
Multiple factors have fed the current supply chain crisis
Port congestion, a huge spike in consumer demand/shipping volume, and limited ocean freight capacity have all disrupted supply chains for the last two years and counting.
This has been the reality at every port in the U.S. since early in the pandemic when factories first started closing due to COVID surges and the resulting lockdowns/restrictions.
But how exactly does a factory in China stopping production lead to a backup of containers at U.S. ports?
What’s causing the delays in freight shipments?
It’s tempting to lay the blame at the feet of the COVID virus. After all, isn’t that why those factories have been shutting down?
The truth of the matter is that there are many interlocking factors contributing to the current situation, with no easy answer to the above question.
Consumers are buying more stuff than ever and, frankly, the supply chain wasn’t ready for it. It’s getting held back by dilapidated infrastructure on top of port congestion, plus the fact that freight is often still conducted with back-of-the-envelope calculations and handshakes.
We’re just now recognizing the pain of 20-plus years of not investing in our infrastructure and upgrading our logistics technology stack.
All of this has led to a snowball effect with the end result being the current supply chain crisis. And with COVID continuing to surge in key areas, it’s looking like the situation isn’t going to clear itself up for some time to come.
That means it’s on all of us to find ways to work within and around the constraints of these disruptions, to learn how to make the supply chain more agile and resilient, and most of all — to keep the goods flowing.
Let’s dive a bit deeper into the freight cycle and what else is at the root of the current crisis.
The image above depicts how each freight cycle adds complications and compounds any issues that came to light in the preceding cycle. When we have record consumer spending in the U.S. (as we’ve seen during the pandemic), it leads to a spike in freight and container prices.
Those rising prices led carriers to deploy more capacity into the most profitable trade lanes like the transpacific eastbound (TPEB), which then led to record-setting volumes.
But to absorb those record volumes, you need ALL the other nodes along the supply chain to scale: labor, physical infrastructure like cranes and lot space, availability of chassis, 24×7 access to ports, and much more.
When those things didn’t scale with the pace of demand, we got the congestion crisis that still hasn’t been resolved. The delays in unloading containers from these ships led to equipment shortages, which led to space and chassis shortages, which led to inventory shortages, which prompted customers to order more in an effort to hoard products that were already in short supply.
As you can see, there’s a lot more going on than a few factory shutdowns. One further piece of the puzzle is the rise of what’s called Just-in-Case manufacturing. This model became dominant over the past decade or so, leading to elevated inventory levels and leaving scant space for differentiated products on already full freighters.
What can a retailer do about disruptions that seem out of their control?
Start by understanding the difference between fixing and adapting. Given the sheer number of precipitating factors involved, chances are we aren’t going to see a fix for the global supply chain crisis overnight.
There’s nothing stopping you from modifying your processes and pivoting your company’s supply chain to adapt to the current situation — and making your business more resilient to future disruptions in the process.
This one is best explained via a brief example scenario:
In the second half of 2021, only 85% of scheduled sailings held — the rest were canceled or blanked. Say a company had one booking and they put five containers into that booking. There’s a 15% chance that whatever vessel it was booked on won’t actually leave.
Now the company is looking for a new sailing date, potentially weeks later, to load that cargo on. Alternatively, if they had split those five containers over three, four, maybe even five bookings they could have diversified the risk.
Placing them across multiple vessels increases the chances that four out of the five would have departed. For retail businesses in particular, the difference between getting 80% of inventory on time versus potentially not getting any inventory on time could make or break the company.
Increase visibility into your supply chain
Partners, suppliers, your customer service teams, and anyone else you choose can benefit from better access to real-time data and insights. The increased complexity of modern supply chains calls for better analytics to help you stay in front of future unknowns.
Impending bottlenecks can’t hide when you have end-to-end visibility that allows for preemptive mitigation of potential disruptions even while your goods are en route.
Do what you can to unblock your supply chain bottlenecks
As with most business decisions, there are short- and long-term options that will address the root causes of your logistics bottlenecks.
Some will be quick and easy to implement, while others may take longer and be more resource-intensive, but all are worthy of your consideration in light of the potential impact on your business if left unchecked.
Understanding the different methods of shipping freight from China
Given the size and scope of the global supply chain, and given China’s physical distance from the U.S., it stands to reason that options for getting freight from there to here are limited. The exception is in cases of companies small enough to use consumer shipping methods like UPS or DHL.
We’re going to look more closely at companies shipping via freight, omnichannel ecommerce brands in particular. Given that parameter, the options come down to ocean freight, air freight, and mixed modal/intermodal freight.
Shipping freight by sea
By far the most common, and by extension the most economical, option for getting goods from China to their destination is ocean freight.
In 2020, approximately 815 million twenty-foot equivalent units (TEUs, or the rough equivalent amount of cargo that fits in a twenty-foot shipping container) of freight moved via ocean.
If you don’t have large enough shipments to fill a container, known as a full container load (FCL), there are options for shipping less than a full container (LCL). Understand that LCL isn’t without its downsides, primarily the added time and complexity of the consolidation and deconsolidation stages necessary at either end of the ocean journey.
We’ll be talking about a new, custom offering from Flexport and ShipBob that lets you bypass those steps later in this article.
Shipping freight by air
Air freight is fast, and expensive. It also currently makes up a significantly smaller portion of global freight, sitting at approximately 3 million TEUs as of 2020, or just .37% of ocean freight volume.
That said, there are situations where using air to guarantee speedy delivery of a portion of your goods may be your best option.
Consider products with shorter lifecycles like fashion or seasonal hard goods, surprise surges in demand for certain SKUs, or situations where pandemic-related shutdowns have paused production and you need to catch your inventory up when production resumes.
These scenarios are not uncommon, and all present good use cases for the speed of air freight, and justification of the higher costs associated.
Mix it up: multimodal and alternative routing options
Nobody said you had to choose just one option for getting your freight shipped from China. SKUs with lower profit margins or more predictable demand cycles can easily go by FCL or LCL ocean freight, while you can select higher-priority SKUs and send them ahead by air.
Consider your needs and find the right balance between speed and cost to identify the right mix of modes for your business.
One final option to keep in your back pocket is alternative route planning. For example, during a port shutdown, it may be possible to truck your goods to a nearby port that’s still operational, then have your container directed to a less congested port on the receiving end.
When considering this option, it’s crucial to consult your data to have a good handle on the impacts such a shift would have on your up- and down-stream partners — not to mention the possible additional costs associated. While it’s important to remain open to all possibilities, it’s also key to adjust for market conditions.
How to get your freight shipped from factory floor to customer’s door on time
Given the current condition of the global supply chain, how can small and medium-sized omnichannel sellers feel secure that they’ll have the goods they need, where they need them, when they need them?
One option that’s growing in popularity is to turn toward smaller carriers with large networks of partners, rather than the big freight players who handle everything in-house.
Taking advantage of the agility and growth mindset of a smaller carrier opens the possibility of expanded options for using the traditional modes above. Truckers, warehouses, consolidation facilities, distribution centers, and 3PLs are all jockeying to make it onto these carriers’ lists of partners, opening far more options than you would have had in the past.
This route also opens the possibility for new products that offer alternatives not seen before. One such product is Flow Direct, a new offering from Flexport and ShipBob that does just that.
What is Flow Direct?
In effect a streamlined competitor to LCL, Flow Direct can get your goods from the factory in China to a ShipBob fulfillment center in a fraction of the time of a standard ocean freight shipment.
We do this by eliminating the time-consuming deconsolidation process. Instead, ShipBob customers’ goods are all shipped in a single container that lands at a less-congested pier at the Port of Los Angeles, and is taken directly to the ShipBob fulfillment center.
Flow Direct was developed to make global trade more accessible to SMB omnichannel sellers. This service is intended to simplify complex supply chain operations and help merchants focus on business growth and getting their inventory faster, all with increased visibility.
Flexport Flow Direct is 2x faster than comparable LCL products, has 100% reliability rate for departure, and is lower in cost than Air or Premium Ocean FCL.
Why choose Flow Direct?
Aside from the time and cost savings of skipping deconsolidation, some additional benefits of choosing Flow Direct include:
- Guaranteed space in a dedicated Flow Direct container. Flexport handles consolidating ShipBob customers’ cargo into our dedicated Flow Direct containers, eliminating the possibility of a container not making its scheduled sailing because of customs or other unforeseen delays.
- A set delivery schedule, so you know those high-priority SKUs will arrive on a regular cadence.
- Your goods are delivered directly to your ShipBob fulfillment center with no stops along the way (deconsolidation centers, intermediary distribution centers, etc.), meaning your customer orders can be fulfilled on time.
The future outlook of freight from China
In the short-term, increasing demand combined with the aftermath of the most recent round of COVID-related lockdowns will have a downstream effect for at least the remainder of 2022.
Forward-thinking tech-enabled logistics companies like ShipBob and Flexport stand ready to solve new challenges as they arise. Right now, that challenge is how to make the supply chain more resilient and agile, and FreightBob powered by Flexport’s Flow Direct is the result of our combined efforts to help our customers navigate beyond the current crisis.
The long-term outlook for the global supply chain will have to start with some releveling of demand and capacity, so continuing to work on your supply chain resilience should remain an important piece of your logistics strategy.
Creating visibility into your end-to-end supply chain, finding new ways to use available data resources (Flexport Research puts out a Weekly Economic Report and various indicators, all of which are great places to start), and staying agile and ready to pivot when opportunities arise will all help ensure your business is set to thrive in the next normal.
If you have questions or want to learn more about FreightBob powered by Flow Direct, contact an expert here.
Shipping from China FAQs
Here are answers to the top questions about shipping from China, answered by ShipBob.
What is the cheapest way to ship freight from China?
The cheapest way to get freight shipped from China is via shipping by ocean.
Does ShipBob ship freight from China?
ShipBob helps customers ship freight from China to ShipBob’s fulfillment centers through freight brokers like Flexport. ShipBob’s FreightBob solution, which is in part powered by Flexport, acts as a managed freight system.
What does shipping freight from China take so long?
There are many factors that have contributed to prolonged timelines of shipping freight from China in recent years, including port congestion, a spike in consumer demand leading to greater shipping volume, and limited ocean freight capacity.
Every port in the United States has been affected since the onset of the pandemic when factories first started closing due to COVID outbreaks and resulting lockdowns. Outside of that, ocean freight takes longer to transport than faster methods like air freight.
What’s the best way to ship freight from China?
This will depend on what’s most important: speed or cost. If you need freight from China fast, air shipping is going to be the best bet, but if you can afford to wait and need to consider the lowest cost option, then ocean freight is best.