Shippers Can Mitigate Port Congestion, Says Flexport

Barring an unforeseen steep drop in demand, port congestion and supply chain problems are unlikely to improve next year, and shippers should continue to expect container issues and equipment shortages, said Flexport CEO Ryan Petersen on a webinar hosted Wednesday by the freight-forwarding company. But individual shippers can act themselves to mitigate delays and high container fees, including routing shipments away from highly congested ports and minimizing empty space in containers.

“It feels like the key to really the next 50 years of business is going to be all about how do you adapt to the chaos that's inevitable,” said Petersen. “I'm not seeing a lot of things that show me it's going to get dramatically better.”

Petersen said companies should be sure their containers are “fully loaded so there’s no empty space,” which may mean redesigning packaging or working closer with their factories. He said Flexport sees an average of about 30% empty space across containers. “You can do a better job optimizing these things,” Petersen said. “That's the easiest way to save money, is to put more stuff in the same number of containers.”

Shippers and forwarders can also avoid ports with the highest levels of congestion, Petersen said. “It's still a little bit frustrating to me to watch how all these containers still get routed through the Port of Long Beach when there's less congestion in Oakland and Seattle and other West Coast ports,” Petersen said.

Petersen also stressed closer collaboration with factories, calling it “painful” when shippers have to cancel their bookings because the factory “wasn’t ready.” He said about 30% of all bookings were canceled before the pandemic, which created “chaos” because ocean carriers were forced to overbook to ensure they have full containers.

This could lead to new trends in shipping contracts, including enforcement clauses that would force shippers to pay for their bookings even if they “don't show up,” Petersen said. He also said he hopes for more “reward mechanisms” in the shipping industry, such as lower rates or higher loading priority for shippers who prove they're reliable. “I think there's going to be an evolution, an opportunity in this market to create more market-dynamic pricing that factors in the reliability of the customers," he said. "Are they meeting what they said they would in terms of their cargo-ready date and actually being there to pick up?” he said. “We still see pretty high cancellation rates of containers even in a world of scarcity.”

As port congestion persists, companies should also closely monitor the labor contract negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union, Petersen said (see 2111240052). Their contract expires in July. In 2015, the last time their contract expired, there was a “three-month port strike where nothing shipped on the West Coast,” he said. “So all of the ports on the West Coast are at risk next summer of either an absolute shut down with a strike or slowdowns as negotiations take place.”