The past year has opened the door to many risks—and response strategies—that supply chain leaders must now keep top of mind when making critical inventory, demand, logistics, and pricing decisions.

STOCKPILING AND DEMAND VOLATILITY

A wave of organizations took up the practice of stockpiling over the past year to mitigate demand and offset transportation shortages and rising prices. However, this practice can often create more headaches than it alleviates. There are costs associated with stocking extra inventory, which may very well end up being passed on to the consumer.

In this scenario, supply chain leaders should look to a more active approach to demand management to help mitigate excess inventory and avoid passing added costs on to the consumer. Identify the demand signals that are critical to your business—whether raw point-of-sale data, social sentiment, or socioeconomic data—and then align on the actions you can take to actively shape demand to account for your increased inventory.

The challenges of the past year have also demonstrated how reliant organizations across industries are on a well-run ecosystem of suppliers, manufacturers, and logistics providers.

This ecosystem is often a global one, and while that can help with supply chain diversification, it can also lead to bottlenecks and disruptions—from tariffs and political negotiations that impact trade routes, unplanned weather events, or COVID flare-ups that can lead to factory or border closures, or temporary reduction of capacity.

Supply chain leaders can better prepare for unplanned disruptions by embedding more agility and visibility into their global ecosystem. Leveraging end-to-end supply chain management technology to share data across the supply chain in real time can help replan if downtime hits a supplier, or a factory is closed in a region. It is easier to change course on the fly, mitigate potential risk, and drive forward.

FREIGHT AND LOGISTICS

While it may have worked in the past, making assumptions at the beginning of the year about freight capacity, driver and warehouse availability, or associated costs, is no longer an option. Instead, supply chain leaders are tasked with navigating increases in shipping volume and diesel prices, a capacity squeeze, and a driver shortage—and that doesn’t account for unplanned disruptions.

Strong forecasting capabilities can help supply chain leaders more accurately predict their freight needs, and when combined with real-time visibility, can help make trade-off decisions to expedite or change lanes. They can also use more accurate forecasting to make pricing and promotion decisions that shape prime shopping windows and alleviate a potential logistics crunch in the future.

INTERACTION EFFECTS AND SCENARIOS

Often, these risks are scored or assessed independently, but never frequently compounding at the same time. Traditional risk management approaches often do not assume interaction effects, which leaves businesses more exposed when their often linear, discrete assumptions interact and produce far higher, or lower, outcomes than anticipated.

To counter, a robust and configurable scenario management approach that hinges on identifying “potential” interactions and elevating them for CXOs to review can help business leaders understand potential interactions and prepare for destabilizing options.

Author: Evan Quasney, Global VP of Supply Chain Line of Business, Anaplan

Source: www.inboundlogistics.com

Image:

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Disruptions, technology innovations, and consumer demands will persist in 2022. These are the four key trends impacting 3PLs in the coming year, the report says:

1. Supply chain disruptions will continue to plague the industry through much of 2022, creating more pressure for 3PLs to provide strategic insight into inventory and risk management and provide greater demand planning sophistication.

2. Omnichannel fulfillment will become even more prominent as companies seek to expand sales channels and leverage the same inventory to fulfill across all channels, pivoting to support where demand is highest.

3. 3PLs and 4PLs will need to collaborate with other warehouses to create integrated ecosystems that support the level of sophistication in today’s supply chain.

4. Technology is transforming rapidly, with companies shifting to more highly adaptable cloud-based software that leverages fulfillment innovations and integrates with the broader logistics ecosystem.

Source: www.inboundlogistics.com

Image: www.pixabay.com

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The fragility or brittleness of a global marketplace so deeply dependent on just-in-time inventory. Any event, whether a pandemic, hurricane, or a container ship stuck in the Suez Canal, creates immediate disarray. In response, retailers have reverted to “just-in-case” practices, building up large safety stocks. It has become a choice between risking a stock-out or keeping costly excessive inventory. Where is the balance?

—Joe Dagnese
President and CEO
PECO Pallet

Supply chain professionals should use the experiences of 2020 and 2021 to take a fresh look at their supply networks, understand their vulnerabilities, and then take the appropriate actions to improve resilience. Doing so can create competitive advantage; failing to do so leaves an opening to the competition. Supply networks may contain potentially crippling risks, and organizations must identify and remediate them.

—Oliver Lemanski
CEO
OnProcess

Close coordination and support throughout every point of the supply chain is the new normal. Disruptions have had a lasting impact on customer confidence. Detail-oriented supply chain management, enhanced customer service, and data-driven inventory decisions are essential to reestablishing a chain of confidence.

—Angela McNally
Vice President, Global Provider Solutions
Owens & Minor

The supply chain is ripe for innovation. A singular disruption impacts a sequence of events, creating inefficiencies. The positive outcome of this unprecedented market cycle is collaboration across the supply chain resulting in technology solutions. This improves productivity by getting goods to shelves efficiently on a go-forward basis.

—Blair Blake
VP, Carrier Strategy
Arrive Logistics

I’ve learned not to take consistent air and ocean supply chains for granted. The past two years have been inefficient, making delays commonplace and causing deficits and surpluses of inventory due to increased freight costs. The solution is to stay informed and listen to suppliers, freight forwarders, and consumers.

—Richard Huang
CEO
Cloudious9

Flexibility in planning beats perfect execution. The market is in flux; the businesses succeeding are the ones adapting to what is being thrown at them. If I’ve learned anything over the past two years, it’s that perfectly planning for the long term doesn’t necessarily lead to success.

—Sean Elliott
Chief Technology Officer/Chief Digital Officer
Körber Supply Chain

Our reliance on a few key ports and jobs (dock workers and truck drivers) highlighted our supply chain fragility. It only takes one or two bottlenecks to have ramifications and ripple effects throughout the entire economy.

The recent supply chain challenges also demonstrated how critical the ports of Los Angeles and Long Beach are specifically to the United States—these ports are in earthquake-prone regions, and a large earthquake impacting one or both of these ports could make COVID-19 related challenges seem more like a nuisance than a major disruption.

—Megan Linkin
Senior Parametric Nat Cat Underwriter
Swiss Re Corporate Solutions

The companies that succeed are the ones that communicate most effectively. Because there are so many players (vendors, manufacturers, 3PLs, carriers) and software all working together to run a supply chain, the companies that create a common vision, communicate the vision, and hold all parties accountable to the same standard are the ones that have adapted to the pandemic successfully.

—Keith Moore
Chief Product Officer
AutoScheduler.AI

Inventory is not necessarily the “evil” that supply chain professionals once thought. Having distributed inventory in strategic locations at an inventory carrying cost that does not burden your balance sheet can be the key to supply chain resiliency and winning.

—Tom Nightingale
CEO
AFS Logistics

Having the right systems and technology matters. The supply chain changed in a hurry, our systems and technology helped us to adapt quickly with it. We were able to quickly identify obstacles and overcome them. By embracing forward thinking, we were able to limit the impact of supply chain issues.

—Lonny Holston
Export Operations Coordinator
Mickey

Two things we have learned: We must: 1) understand data to minimize risk and 2) identify weak spots in the supply chain to improve workflows. Organizations that have met the challenge of the past two years have done so by making calculated investments in technology and processes to limit disruptions.

—Mark Casiano
SVP, Sales, Marketing & Customer Experience
Odyssey

The past two years exposed infrastructure cracks in our industry—specifically when looking at effective capacity at ports and equipment availability. Simply adding more ships and more containers will not get us anywhere if there is not more capacity in the system to receive those containers.

—Nathan Strang
Director, Ocean Trade Lane Management
Flexport

Visibility is vital. The shortages of raw materials and extended supplier lead times have drastically increased stock-outs. You need complete visibility of 1) inventory indicators to ensure you can meet demand and 2) knowing how well your suppliers perform.

—Ara Alec Ohanian
Group CEO
NETSTOCK

We need to fully digitize our supply chains if we want them to be resilient in the face of unexpected disruptions. By unifying our digital systems, applications, and processes, we will be able to efficiently manage supply chain operations.

—Antony Francis
Supply Chain and Logistics Consultant
Endava

Retailers need better information to navigate quickly. As supply chain bottlenecks have impacted every retail touchpoint, winning means knowing your options and what the market is doing. With AI-driven market intelligence, brands can make better and faster decisions to deliver great customer experience and grow revenue.

—Juliana Prather
CMO
EDITED

We learned how to stand up brand new distribution operations in new markets at warp speed. In some cases, we went from no market presence at all to lease, equipment, and team in place and completely RF-integrated in just three weeks. We also delivered a building five months ahead of schedule.

—Dale Young
Vice President
Warehousing & Distribution
World Distribution Services LLC

The pandemic is by no means a short-term crisis event. Its impact on the work of people and the functioning of the supply chain in the organization will be long term. Therefore, in order to effectively confront the challenges of the future, the business must increase long-term resilience along the entire supply chain. To do this, supply chains must leverage platforms that offer access to applied analytics, AI, and machine learning solutions, and provide end-to-end transparency.

—Dmitri Fedorchenko
CEO and Co-Founder
Doft

The retail supply chain can no longer be protected from the impacts of omnichannel. The volume of omnichannel purchases and fulfillment has grown to the point that retailers can’t treat it like a rounding error. They must make supply chain strategy and network changes or risk losing their shirt—literally and figuratively.

—Nikki Baird
VP, Retail Innovation
Aptos

The most surprising lesson I learned was how much the supply chain relies on commercial uplift. The airlines fly passengers all over, and airline companies reserve space for cargo on commercial flights.

We saw firsthand how much companies relied on airplanes, so when the pandemic hit, and there were fewer flights happening, that contributed to the bogged down supply chain. As more passenger flights come back, that has the potential to ease supply chain challenges.

—Dustin Hansen
CEO
InXpress

The magnitude of disruptions supply chains faced over the past two years demand rapid innovation. The world around us has changed fundamentally, so legacy systems and their outdated approaches no longer serve supply chains well.

Adapting an adage, futility is doing the same things and expecting the same results, even when the underlying assumptions have shifted. Supply chain leaders who have digitally transformed their organizations are the ones positioned to address emerging trends, mitigate risk, and identify new opportunities.

—Polly Mitchell-Guthrie
VP, Industry Outreach and Thought Leadership
Kinaxis

Adaptation is absolutely critical. You have to offer substitutes, source creatively, have a plan B and maybe even C, and be vigilant in getting accurate data.

—Kevin Ledversis
Sales Director
Newcastle Systems

It’s more important than ever to “architect” agility into processes. The growing complexity of supply chains introduces plenty of opportunities for things to go awry. The more shippers can digitize and standardize manual operations, the better equipped you are to pivot when needed and keep shipments moving.

—Virgil Ferreira
COO, Rate Management
Magaya

The pandemic highlighted the need for a much closer relationship between manufacturers and their 3PL partners. We are working more closely with our partners than ever before—developing innovative and collaborative approaches to tackling these new, longer-term challenges.

—Jim Saponaro
President, Life Sciences & Healthcare
DHL Supply Chain

Relationships now are more important than ever. Whether it’s developing partnerships with secondary and tertiary suppliers to meet rising demand, or managing the expectations of vendors and customers during challenging times, the importance of establishing and cultivating strong, lasting relationships cannot be overstated.

—Jonathan Parks
Senior Vice President, Supply Chain
iGPS Logistics

Amateurs hunt dollars, professionals hunt relationships.

—Whit Smith
Director of Operations
TA Services

We need to be able to plan and face the consequences that result from the consolidation trend of brands and businesses. Consolidation has caused massive inefficiencies and created a lack of options due to the absence of competition. Many companies have benefited in the short term from these mergers but do not recognize their role in the supply chain or do not plan accordingly.

This has resulted in practices that can be monopolistic in nature and can have disastrous results in the operation of the chain, especially for smaller brands and product lines. However, big actors, who have actively promoted mergers and consolidations did not realize—maybe until very recently—that their operations are at risk as well. Until these larger groups and brands realize that their practices have affected the overall functioning of the global supply chain, logistic partners need to be prepared for disruptions.

—Eric Gomez
CEO
maxiaNET

Source: www.inboundlogistics.com

Image: www.pixabay.com

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James Gagne, president and chief executive of Seko Logistics, outlined a challenging market for freight forwarders in 2022.

He highlighted ongoing issues in ocean shipping, labour shortages due to Covid hitting port/airport operations, ongoing consumer spending for at least the first six to nine months despite inflation, elevated freight rates, rising e-commerce demand, semi conducter demand/shortages and driver shortages as just some of the challenges facing supply chains this year.

For airfreight, belly capacity also appears unlikely to recover to pre-Covid levels this year.

As a result, 2022 will be “the year for air charters”, he said.

“The focus is on doing more on the charter part and we see the need for charter capacity only growing to service our clients,” he said.

Last year the company used 397 charter flights compared with around 72 flights in 2020. This year Seko expects this figure to grow further by around 20-30%.

Other forwarders have also been busy expanding their charter operations in the opening months of the year.

Geodis will expand its AirDirect cargo network in Asia Pacific as it looks to meet “surging demand” in the region.

AirAsia X (AAX) has formed a new air logistics partnership with Geodis to provide the additional cargo capacity.

As part of the partnership, the airline will provide Geodis with “dedicated scheduled cargo flights” on a new weekly rotation from Kuala Lumpur (KUL) to Shanghai (PVG) and Sydney (SYD) and will also add a second weekly rotation to its existing KUL – Hong Kong (HKG) – Chennai (MAA) – KUL service.

This agreement is set to run for an initial period of six months commencing from January 20 with further extensions to be considered.

All the flight schedules are serviced by aircraft chartered on a long-term basis and will add an extra 320 tonnes of capacity to its charter network each week, Geodis said.

Meanwhile, in mid-January, DB Schenker added charter capacity out of India as it looks to meet capacity constraints.

The forwarder offers charter capacity on a weekly flight operating on the route: Bengaluru-Doha-Munich-Chicago. The new route is being operated by Qatar Airways Cargo utilising one of its B777 freighters.

The flight is in addition to its existing charter operation covering Mumbai, Frankfurt and Atlanta.

Both flights connect three continents as part of the forwarder’s Global Flight Operations Network.

The company told Air Cargo News that the new route would cover a wide range of verticals such as automotive, consumer and retail, electronics, industrial and chemicals, healthcare and aerospace.

Also, DSV has responded to Covid restrictions and lockdowns in Asia by adding extra freighter capacity from Hong Kong and Singapore.

The freight forwarder is adding two extra weekly flights – offering 100 tonnes of capacity each – to its Hong Kong-Liege-Hong Kong loop, bringing its weekly flights on the route to three.

Meanwhile, the company has also introduced a new weekly route from Singapore to Los Angeles.

DSV vice president and head of the DSV Air Charter Network, Mads Ravn, said: “Right now, the market is greatly underserved – especially out of Asia where the situation is being impacted these days by increased Covid incidents and by new restrictions. We are monitoring the situation closely, so we can continue to do what we can to keep our customers supply chains flowing.

“We are also introducing a new DSV Air Charter route from Singapore to Los Angeles (LAX), which can further relieve the pressure on some of the other hubs in the region and also bring a little more flexibility to our customers on our airfreight offerings out of Asia.”

The announcement from DSV came shortly after Cathay Pacific made “substantial reductions” in its long-haul freighter network for the first quarter, with no flights operating to Europe and just seven per week to the Americas.

www.aircargonews.com

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The Omicron virus may be less deadly than prior variants of the virus, but it is taking a heavy toll on businesses and their supply chains.

The air cargo sector is being hit particularly hard. Schedules are in disarray as flight crews are unavailable because of infection, a patchwork of national policies shuts down routes at short notice, and infections and quarantine measures are decimating ramp and warehouse crews, affecting the flow of cargo.

In probably the starkest example of the impact of Omicron, Cathay Pacific stopped longhaul freighter flights for seven days altogether.

It has since resumed all-cargo service to the Americas at a much reduced level, but management does not expect to be running freighters to Europe through March.

For forwarders, these developments have made finding and booking flights a time-consuming slalom through quicksand.

Like airlines, they have been stretched to the limits since the pandemic started and have little leeway to absorb further complications and hurdles.

In the face of the pandemic this industry has shown remarkable flexibility and an ability to re-think the business, coming up with new solutions that often involved collaboration with other parties, including competitors.

Operators have shared resources and facilities with their rivals to keep cargo flowing.

A second crucial part of the struggle has been the effort to streamline processes and automate repetitive, routine functions.

Most firms are understaffed and can ill afford to waste their precious human resource on activities that a computer can perform. And in the current chaos of schedules and pricing, they do not have the time for this either.

Start with bookings. Before Covid it made sense for forwarders to send out blast e-mails to multiple airlines requesting quotes for a shipment.

How many carriers have the time to respond to this today? There is no reason why pricing queries, and indeed the full booking process, should not be performed online.

Of course, this can only happen if the airlines do their part to make this avenue viable. Posting last month’s rates on their website is not adequate.

They must offer fully functioning booking capability with the latest schedule and price information – ideally through multiple channels, but at least on their websites.

Source: www.aircargonews.com

Image: www.pixibay.com

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This was the takeaway from the World Cargo Summit’s Air Cargo Market Update & Outlook, which focused on the market outlook for 2022 and beyond, hot spots for growth and the outlook for cargo charters.

Niall van de Wouw, managing director at CLIVE Data Services, said the company’s data comparing the fourth quarter of 2021 to the same period in 2019 showed that rates continued to increase on a global level, on average two and half times as high as pre-Covid.

It became tougher to move goods because of the challenges ground handling staff faced in loading/unloading/preighters. This led to congestion, which affected throughput.

“The difficulty in getting goods from A to B pushed up the rates to unprecedented levels.”

In the first two weeks of January 2022 compared to the same period in 2021 rates were up more than 40%.

“Looking ahead we currently see no fundamental changes in the dynamics that are causing these rates to be at these levels that we expect any easing soon.”

Abel Alemu, managing director, Ethiopian Cargo & Logistics Services, added that Covid-related labour shortages and quarantine restrictions “will keep capacity tighter for longer” and this may result in “persistently elevated airfreight rates”.

He added that reduced bellyhold capacity will also contribute to this “upwards pressure on airfreight rates”.

The industry stakeholders agreed that due to full order books for freighters, capacity remains in demand.

Reto Hunziker, group cargo director for charter broker Chapman Freeborn said the company has managed this by using in-house own control capacity including Bluebird Nordic 737s and Magma Aviation 747s, plus third-party carriers. He said that zero LOPA configuration aircraft also helped.

Konstantin Vekshin, chief executive officer of  Volga-Dnepr Group said the company resumed its Antonov 124-100 operations in 2021, but the fleet of 12’s estimated lifespan of 10-12 years is a concern. “It is a very unique piece of equipment and there is no replacement for it.”

Ethiopian Airlines Group is working with Israel Aerospace Industries (IAI) to launch a B767-300ER freighter conversion line in Ethiopia. Alemu confirmed Ethiopian Cargo also currently has 20 preighters.

Ground handling support with regards to staff shortages and restrictions is a major concern.

Alemu pointed out some airports in Europe have said they will not handle preighters, while US ground handlers also have restrictions.

Hunziker said Chapman Freeborn has faced cancelled flights and delayed cargo clearance from airports of up to five days. “We have very big challenges with preighters especially out of China and Kong Kong both into Europe and the US.” As a result, there has been a shift to Vietnam and Korea, where the company operates preighters long term.

Vekshin added that Volga-Dnepr will await China’s legislation this year following the country’s ban on preighters. “If they’re sticking to their plans that maybe a game changer for the industry, at least for 2022…as it will affect all of us.”

Pharmaceuticals, PPE and e-commerce demand are set to continue to be strong drivers for the air cargo industry, according to Hunziker and Alemu.

Alemu said in the second half of 2021 major trade lanes were China-Europe, China-Latin America and South East Asia–US. The company saw major growth in South East Asia and recorded the largest expansion in Latin America.

Hunziker said growth was recorded worldwide in 2021 with China the driver for this.

Van de Wouw said US growth was up 30% in 2021 compared to 2020 when it was hit hard by Covid. APAC growth remained high in 2020 because of PPE trade, so 2021’s growth was not high.

He explained the Europe to US market is much stronger than from the US to Europe, adding Asia Pacific into the US “dwarfs” the market from the US to APAC.

While continued ocean freight congestion and reduced belly capacity is driving air cargo demand, the industry has no control over these factors, so uncertainty over the sustainability of growth remains, said van de Wouw.

He thinks as passenger demand returns “things will get worse” initially as there will be less room for cargo and pressure for capacity, until flight frequency increases but he doesn’t “see that happening anytime soon”.

Source: www.aircargonews.com

Image: www.pexels.com

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Around September last year, the air cargo industry was tentatively hoping that the market could be setting out on the road to normality.

Major economies were slowly opening up as Covid case numbers were showing signs of easing and passenger operations were beginning to get back underway as travel restrictions were lifted.

Then November arrived bringing with it the Omicron variant. Lockdowns, travel restrictions, supply chain issues and reductions in bellyhold and freighter capacity on major trade lanes ensued.

Adding to those challenges, the start of the year also sees the industry having to contend with the two-week Chinese New Year holiday, which typically sees a surge of cargo ahead of factory closures, and this year the Beijing Winter Olympics is expected to cause further disruption.

With the year off to a challenging start, Air Cargo News caught up with a cross section of the industry to find out their expectations for the remainder of 2022.

DSV vice president and head of the DSV Air Charter Network, Mads Ravn, tells Air Cargo News he expects a roller-coaster market with Covid continuing to disrupt supply chains, while bellyhold operations will be slow to return.

“Demand will remain strong in every sector and, as the year has already proven, Covid will continue to play a major role in whether capacity will return,” Ravn says.

“Especially on key routes from China and Hong Kong – where they continue to have some of the most severe restrictions – we need some sort of consistency throughout the year.”

He adds: “Belly carriers are trying to piece a programme together with multiple new seasonal destinations that will not necessarily benefit the lack of capacity in the market to and from core manufacturing sites.”

DSV believes that the return of belly capacity to pre-crisis levels is being pushed further out.

“The initial anticipation of 2025 is likely not happening and destinations serviced will change as business travel is very slow to come back,” he says.

“Therefore, we are focusing on maintaining and developing our own DSV Air Charter Network so we can continue to provide as much reliable and flexible capacity as possible for our customers.”

Ravn says handling operations are also likely to come under pressure this year.

“To secure enough people on the ground is perhaps the most severe challenge in several gateways in North America and Europe,” he says.

“This, combined with outdated US infrastructure and lack of staff returning to work, will also influence and slow down recovery.”

Scan Global Logistics (SGL) says it expects the unpredictability of 2021 to continue into this year.

“We expect the market to be pretty much the same as in 2021; travel-restrictions, no clarity about Omicron and potentially other [variants] to follow, and no, or only limited, additional freighter-aircraft to be supplied to the market.

“This will keep constant pressure on the capacities and rates. [Covid] test kits, ocean challenges, airport/ground handling issues etc will remain, leading to increasing charges.”

Looking at seasonal trends, SGL says that the first quarter will remain challenging with rates elevated, the second quarter and early on in the third quarter may see an easing of the situation before the peak season ramps up in mid-September.

On the return of bellyhold capacity, SGL’s global head of airfreight, David Wystrach, says: “Mid-term on this side of the summer, travel restrictions and uncertainty will continue to limit leisure travel.

“Business travellers will not be back to anywhere close to pre-Covid-times. This will limit number of flights and served port pairs.

“Some routes added to the network may be less cargo friendly, e.g. leisure destinations on transatlantic routes.

“On top of this, the current Omicron [variant] will as well impact crews and pilots and with this further reductions on rotations are to be expected.”

Wystrach is also expecting ongoing labour issues across the market to affect ground handlers, forwarders, airlines and trucking companies.

Hervé Bonis, deputy chief executive, Seafrigo Group, says Omicron and seafreight issues will drive demand in the air: “The overall global environment remains uncertain in the first quarter of 2022 due to the high circulation of the Omicron variant of Covid-19 in most western countries.

“This is already impacting on airfreight capacity, especially regarding the China/Hong Kong trade lanes where stringent rules for pilots are in place.”

He adds: “The biggest challenge is definitely to get back to normal regarding intercontinental travel, which then brings back the belly capacity that is not currently available in the market. I expect belly capacity to increase during second half of 2022.

“Regarding our overall volumes, I consider that we will still face seafreight disorganisation, including port congestion, and this will bring opportunity in terms of airfreight volumes.”

Crane Worldwide Logistics chief executive Keith Winters is another expecting labour issues to affect the market.

“There is no question that we are still expecting some turbulent times ahead,” Winters says.

“Currently, with the resurgence of Covid, new vaccine boosters need to be moved and there is still the possibility of borders closing as countries cope with the influx in cases.

“With blank sailings and the Lunar New Year ahead, it’s expected that the first quarter will create more demand which will continue to add pressure in terms of cost.”

On the return of belly capacity, Winters says this is highly dependent on borders opening up.

“We can be hopeful that the new variant will see the end of the pandemic, but there are still so many unknowns,” he says.

“With new aircraft being lined up for charter flights, there will be options, but for now I think we need to look further afield than 2022 to return to what we consider ‘normal’ bellyhold capacity.”

Airlines are also expecting demand to be tight over the coming year.

Roger Samways, vice president commercial, American Airlines Cargo, says that despite some return of passenger flights, indicators suggest that demand improvements and congestion in other modes will contribute to capacity shortages in air.

“Continued capacity shortages in the market, relative to demand, as well as infrastructure challenges at airports, will present ongoing challenges for the air cargo industry,” says Samways.

“We have faced capacity shortages since the start of the pandemic, but we’ve seen innovative, creative solutions across the industry as carriers have tried to support the needs of our customers.”

Samways adds that belly capacity will improve in 2022 compared with last year but won’t get back to 2019 levels due to changing government travel restrictions and possible future Covid-19 outbreaks.

“Our current expectations are that widebody capacity will grow around 20% compared to 2021. The key for our cargo customers, though, is where that capacity is going to be deployed.

“Unlike in 2021 when many of our widebody aircraft were operating on short-haul leisure markets, such as the Caribbean and Mexico, in 2022 our widebody fleet will primarily be deployed on long-haul international markets which is great news for our cargo customers.”

Charter outlook

Charter brokers are also bracing for another busy year. Dan Morgan-Evans, group cargo director at Air Charter Service (ACS), says the disruption experienced over the last couple of years has been too great to unwind completely during 2022.

“The longer time goes on, the more balanced it will become but we are still seeing very strong demand in the short term and long term, with a record number of forward bookings even into 2023,” he says.

“The whole supply chain has changed over the past two years and, unless we suddenly revert to pre-pandemic passenger numbers and all travel restrictions are lifted, then we will continue to see strong demand.”

He says that ACS was previously used to seeing single ad hoc flight bookings with the occasional programme for multiple flights. Now, the company is seeing bookings that are predominantly programmes.

“The challenges will be similar,” he adds. “Covid restrictions, lack of capacity, bottlenecks at airports – but these are all the benefits of using a company like ACS.

“The marketplace is complicated. Whether that’s the aforementioned, or people out there trying to take advantage with phantom aircraft and fictitious contracts.”

Neil Dursley, Chapman Freeborn chief commercial officer, cargo, says the continued impact of Covid-19 shows little sign of slowing down and there is no return to “business as normal” insight.

“What we are seeing in the first weeks of this year is ‘more of the same’; a distinct lack of widebody availability and supply chain challenges impacting the major ocean ports of the world with new restrictions due to new Covid outbreaks in strategic ocean ports. This continues to force more and more cargo into the air.”

Dursley adds that there has been a surge in demand for Covid test kits. The broker has just completed “an enormous programme of flights” utilising multiple AN-225 and AN-124 flights, including on Christmas day.

“Never before in our history, or I believe in the history of the AN-225, has it ever operated so many back-to-back missions,” Dursley says.

“The good news for our clients is that pricing on widebodies from Asia to Europe, as well as transpacific routes, has reduced in January vs December, but we anticipate that this will again increase following the Chinese New Year.”

He adds that freighter operator Magma Aviation, a Chapman Freeborn Group subsidiary, continues to operate at full capacity to and from a range of origins.

He says: “Restrictions on crew due to Covid outbreaks in key locations is creating issues but ones which our partners are supporting so that supply chain continuity isn’t impacted.”

Looking at sectors driving demand, Dursley says that the company is heavily involved in humanitarian related movements for vaccines, test kits and emergency supplies.

“Likewise we see increases in automotive, hi-tech and oil & gas related activities.

“We have continued long-term programmes of e-commerce related movements using passenger-cargo aircraft as well as full freighters utilising both group assets and many third-party airline partners.

“So this storm rages on and with it we are expanding rapidly and recruiting currently over 100 full time employees to support our clients as well as opening up multiple new offices around the globe.”

Navigating the challenges ahead

With another year of disruption and unpredictability ahead, what steps are companies taking to try and navigate the challenges that lie ahead?

Crane Worldwide Logistics’ Winters says that close collaboration, information sharing and flexibility are key to managing the current market conditions.

“It takes all key members of the supply chain to work closely with clients, manage expectations and find solutions that will work in the long term.

“Supply chains are being reassessed by many organisations and are also at the top of priority lists in 2022.

“There is evidence that companies are reverting to nearshoring, alternative routings, transportation switches etc.

“We believe that working together closely with our clients, we can bring the expertise needed to provide solutions, not only the urgent situations, but also in the long term.”

He says these solutions could be additional charter capacity, extra 3PL warehousing or alternative methods of transportation such as rail freight.

Ravn of DSV says that forwarders will need to invest in their own controlled capacity to add some consistency and longevity for customers that commit to capacity and rates.

“Most air carriers have become transactional during last year and there is an intense battle to secure the best commitments in the market,” he says.

“It puts clients, who have been consistent supporters on particular lanes, in a very [difficult] situation, hence they are turning to forwarders like DSV with own controlled charters to leverage their spend, which is often connected to other parts of the supply chain.”

From an airline perspective, Samways of American says that the airline has learnt to expect the unexpected.

He agrees that collaboration across the supply chain is key to managing the situation.

Samways says: “From an industry perspective, increased investment and closer working relationships with industry partners will be important in helping to ensure that we are able to operate efficiently and accommodate as much cargo is possible.”

He adds: “For American, that has included working with our network planning team to help ensure the rebuilding of our widebody network meets both PAX and cargo needs and looking at how we can best utilise our existing narrowbody and trucking networks to help bridge routes and create more options for customers.”

He adds that the airline has already made plans for nearly all its widebody fleet to be dedicated to long-haul international routes, which is ideal for the cargo division.

The company is also poised to take delivery of more than 40 Boeing 787 aircraft over the next few years, which Samways says will help to support further capacity growth across American’s network.

Wystrach of SGL says that it is important that forwarders remain very proactive and that customers keep a high focus on their approach to planning.

“Keeping up with constant schedule changes, impact of airport/port congestions etc., will require an ongoing agility and solution-driven attitude,” he says.

“This will continuously require flexibility for forwarders and customers in regards to pricing, transit times and routing opportunities.

“Constant proactive communication, including offering multiple solutions enabling our customers to make a conscious decision on how to balance cost and supply chain risk, is and will remain a key priority for us.”

Source: www.aircargonews.com

Image: www.pixibay.com

The post Outlook 2022: Another challenging year for air cargo appeared first on Cargo News Today.

Below are four charts showing where a potential escalation of tensions could be felt across global markets:

Safe havens
Inflation at multi-decade highs and impending interest rate rises have made for a bad month for bond markets, but an outright Russia-Ukraine conflict could change that.

Two-year U.S. Treasury yields have seen the biggest monthly jump since 2016 and 10-year rates appeared headed for the key 2% level. In Germany, 10-year yields rose above 0% for the first time since 2019.

A major risk event usually sees investors rushing back to bonds, which represent the safest assets on planet and this time may not be different, even if a Russian invasion of Ukraine risks further fanning oil prices — and therefore inflation.

“Clearly if the Ukraine story was to go wrong there would be quite a significant bid for Treasuries, and this notion of the 10-year getting to 2% would be put on hold,” said Padhraic Garvey, regional head of research, Americas at ING.

Other safe-havens include gold, already at two-month peaks as well as the yen.

Grains and wheat
Any interruption to the flow of grain out of the Black Sea region is likely to have a major impact on prices and add further fuel to food inflation at a time when its affordability is a major concern across the globe following the economic damage caused by the COVID-19 pandemic.

Four major exporters – Ukraine, Russia, Kazakhstan and Romania – ship grain from ports in the Black Sea which could face disruptions from any military action or sanctions.

Ukraine is projected to be the world’s third largest exporter of corn in the 2021/22 season and fourth largest exporter of wheat, according to International Grains Council data. Russia is the world’s top wheat exporter.

“Geopolitical risks have risen in recent months in the Black Sea region, which could influence wheat prices ahead,” said Dominic Schnider, strategist at UBS.

Natural gas and oil
Energy markets are likely to be hit if tensions turn into conflict. Europe relies on Russia for around 35% of its natural gas, mostly coming through pipelines which cross Belarus and Poland to Germany, Nord Stream 1 going directly to Germany, and others through Ukraine.

In 2020 volumes of gas from Russia to Europe fell after lockdowns suppressed demand and did not recover fully last year when consumption surged, helping to send prices to record highs.

As part of possible sanctions in the case Russia invaded Ukraine, Germany has said it could halt https://www.reuters.com/world/europe/germany-signals-it-could-halt-gas-pipeline-if-russia-invades-ukraine-2022-01-18 the new Nord Stream 2 gas pipeline from Russia that was expected to increase gas imports to the bloc but also underlines Europe’s energy dependence on Moscow.

SEB commodities analyst Bjarne Schieldrop said markets would see natural gas exports from Russia to Western Europe likely significantly reduced both through Ukraine and Belarus in the event of sanctions and gas prices revisit Q4 levels.

Oil markets could also be affected. JPMorgan said the tensions risked a “material spike” in oil prices and noted that a rise to $150 a barrel would reduce global GDP growth to just 0.9% annualized in the first half of the year, while more than doubling inflation to 7.2%.

Regional dollar bonds and currencies
Russian and Ukrainian assets will be at the forefront of any markets fallout from potential military action.

Both countries’ dollar bonds have underperformed their peers in recent months as investors trimmed exposure amid escalating tensions between Washington and its allies and Moscow.

Ukraine’s fixed income markets are chiefly the remit of emerging market investors, while Russia’s overall standing on capital markets has shrunk in recent years amid sanctions and geopolitical tensions, somewhat cushioning any threat of contagion through those channels.

However, Russia’s rouble and Ukraine’s hryvnia have also suffered, making them the worst performing currencies in the emerging markets universe so far this year.

Geopolitics on the Ukraine-Russian border presented “substantial uncertainties” to foreign currency markets, said Chris Turner, global head of markets at ING.

“The events of late 2014 remind us of the liquidity gaps and U.S. dollar hoarding that led to a substantial drop in the rouble at that time,” said Turner.

(Reporting by Karin Strohecker, Sujata Rao, Nigel Hunt and Susanna Twidale; Writing by Karin Strohecker; Editing by Alison Williams)

Source: www.marinelink.com

Image: www.pixabay.com

The post How a Russian-Ukraine Conflict Might Hit Global Markets appeared first on Cargo News Today.

The latest statistics from the Association of Asia Pacific Airlines (AAPA) show that during the month cargo demand at the region’s airlines increased by 16.5% year on year and stayed above volumes recorded in the pre-pandemic months of 2019.

The international freight load factor remained “elevated”, averaging 73.2% for the month, after accounting for an 11.8% year-on-year expansion in offered freight capacity.

Subhas Menon, AAPA director general, said: “The resilience of the cargo sector continues to be an important lifeline for the region’s airlines during this pandemic.

“On the other hand, oil prices have risen significantly, with jet fuel prices averaging US$92 per barrel in November, almost double of the corresponding month in 2020, adding to the challenges airlines face in a bid to restore profitability.”

Menon added the spread of the Omicron variant would impact aviation’s recovery in the region.

“Overall, full restoration of international air travel remains some way off. The abrupt re-imposition of travel restrictions by many governments in the face of the rising spread of the Omicron variant threatens to hold back the long-awaited revival of Asia’s travel and tourism industry.

“Collaboration and coordination of industry stakeholders across borders are critical to the safe and sustained resumption of international air travel, without which, the recovery journey will likely be volatile and uneven.”

Source: www.aircargo.com

Image: www.pexels.com

The post Air cargo demand in Asia remains resilient appeared first on Cargo News Today.

“This has been an unprecedented year,” said Jonathan Gold, NRF Vice President for Supply Chain and Customs Policy. “We’ve seen more disruption than ever before because of issues along every step of the supply chain and continued strong consumer demand, but we’re also seeing more cargo and faster growth than ever before. There are still ships to be unloaded and containers to be delivered, but everyone in the supply chain has worked overtime this year to try to overcome these challenges. For the most part, they have succeeded, and consumers will be able to find what they need for the holidays.”

Imports for 2021 are expected to total 26 million 20-foot equivalent Units (TE), an increase of 18.3% over 2020 and the highest number since NRF began tracking imports in 2002. The projected total would top last year’s previous record of 22 million, which was up 1.9% despite the pandemic. The growth rate would also be the highest on record, topping 16.7% in 2010 as the economy recovered from the Great Recession.

While imports do not correlate directly with sales, the record comes as NRF expects holiday sales during November and December to grow 11.5% over last year.

Despite the double-digit import growth for the year, monthly totals have settled to single-digit year-over-year growth, a pattern expected to continue at least through the first quarter of 2022.

“After nearly a year of what seemed like runaway growth once the economy reopened from the worst days of the pandemic and unleashed pent-up consumer demand, port data now shows imports settling down,” Hackett Associates Founder Ben Hackett said. “As economic activity slows after the holidays, we do not expect to see a resurgence of year-over-year double-digit import growth. Instead, it will be more like ‘steady as she goes.’ ”

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U.S. ports covered by Global Port Tracker handled 2.21 million TEU in October, the latest month for which final numbers are available. That was up 3.5% from September but down 0.2% from October 2020, marking the first year-over-year decline since July 2020. The decline ended a 14-month streak of year-over-year growth that began in August 2020 after stores initially closed by the pandemic reopened and retailers worked to meet demand. Even with the decline, October was still among the five busiest months on record.

Port have not reported November numbers yet, but Global Port Tracker projected the month at 2.21 million TEU, up 5.1% year-over-year. December is forecast at 2.2 million TEU, up 4.6%.

January 2022 is forecast at 2.24 million TEU, up 9% from January 2021; February at 2 million TEU, up 7.3% year-over-year; March at 2.19 million, down 3.3%, and April at 2.2 million TEU, up 2.2%.

Source: www.marinelink.com

Image: www.pexel.com

The post US Retail Imports Grow at Record Pace Despite Pandemic appeared first on Cargo News Today.