Disruption Report #44, More Cargo Planes, No End in Site for Supply Chain Snarls, and a New Way to Source in Mexico

Ocean Shipping Lines Are Buying Cargo Planes

One of the world’s biggest cargo shipping companies (they own over 1,000 cargo ships), Maersk, has decided to buy cargo planes and start shipping cargo by air. They are not the only shipping company to do so.

That’s according to a Wall Street Journal article by Costas Paris, “Why the World’s Biggest Ocean Shipping Lines Are Buying Cargo Planes.” It seems that the pressure to get products to market has gotten so desperate that airfreight, once a recourse of last resort, has become a necessity.

“We’ll grow airfreight fast because we need it,” said Ferwin Wieringa, head of airfreight at Maersk.

“Why the World’s Biggest Ocean Shipping Lines Are Buying Cargo Planes,” costas paris, Wall Street Journal

The ocean freighters have no intention of competing with UPS, FedEx, or DHL. They will ship in pallet loads to a few customers rather than lots of small packages to many customers.

Shipping by air is six times the cost of shipping by cargo ship. Before the massive price increases in ocean freight, it was seventeen times higher. A very mixed blessing from the pandemic.

No End In Site for Supply Chain Chaos

With Lunar New Year 2022 now underway and container freight rates, ship charter rates and port congestion still at or near all-time highs, timing sentiment is turning to 2023.

“Supply chain chaos and port gridlock could drag on into 2023,” greg miller, American shipper

Here is what I think: The sad reality is that backups at ports are worse than they were last year. Things are not getting better. China is continuing to close ports whenever there is a Covid breakout. At that same time, demand for consumer goods continues to be strong. Short of government intervention, things will not change until demand shrinks markedly or there is a glut in cargo ships and containers due to overbuilding. Neither is going to happen this year.

ZIPFOX, a New Way to Source in Mexico

A new sourcing website for Mexican manufacturing premiered this week. A Bloomberg article by Laura Curtis describes ZIPFOX this way:

Zipfox, an online platform that links businesses up with factories in Mexico, launched this week, enabling near-shoring of production and the chance to get goods into the U.S. more quickly than if businesses were sourcing from manufacturing hubs in China.

“Tariffs, Supply Snarls Spur Search for Factories Closer to U.S.,” Laura Curtis, Bloomberg

According to the Bloomberg article, it currently averages 110 days to move a shipment from Asia to the U.S. It takes five to ten days to move freight from Mexico to the U.S.

I searched the site. It currently lists 51 factories that can make toys. That’s not a lot compared to China. Still, it is certainly an interesting reaction to what appears to be an endless snarl in the world’s global supply chain.