Supply Chain Issues: Port Congestion

Port congestion poses a significant challenge for shipping and delivery services worldwide. Ports are vital hubs for moving goods, and handling tasks like customs clearance and transportation. When congestion occurs due to overload, it disrupts businesses and supply chains.

Ports are crucial links in a country’s shipping network, connecting traders with a vast amount of goods. For example, the Oakland Seaport in Northern California serves over 14 million people annually.

Congestion at ports impacts global shipping, affecting supply chains, economies and the environment. This article delves into its causes, consequences and possible solutions.

What Is Port Congestion?

Port congestion occurs when ships cannot immediately dock upon arriving at a port to load or unload goods. Instead, they must wait at sea for an available spot. This issue affects approximately 70% of ports that operate 24/7, including the world’s top 10 major ports.

The maritime logistics, freight and the shipping industry face significant disruptions in the global supply chain due to this widespread issue across container depots and terminals worldwide

The problem has intensified with the growth of the container fleet, with its deadweight tonnage surging from 11 million metric tons in 1980 to about 293 million by 2022, including a 4.5% increase in 2021 alone. As a result, ships wait offshore for extended periods, causing container backlogs at ports and lengthy waits for trucks.

The Impact of Port Congestion

In recent years, port congestion has become a significant hurdle for global trade, profoundly impacting global supply chains and the efficiency of goods movement. These congestions are caused by an increase in demand for goods, limited port capacity, and unforeseen events, such as pandemics or extreme weather events.

Port Congestion Delays

One of the most noticeable consequences of port congestion is delays. The arrival of goods that were supposed to reach their destination port within a couple of weeks may now be postponed for several months due to a congested port.

For example, during the COVID-19 pandemic, some of the world’s largest ports, like Los Angeles and Shanghai, experienced unprecedented levels of traffic. This global port congestion led to vessels waiting offshore for weeks, delaying the delivery of essential items ranging from medical supplies to consumer electronics. Almost every business had to deal with shipment disruptions, inventory stock-outs, high freight rates, and production shutdowns.

Supply Chain Disruptions

Port congestion also significantly impacts cargo flow. With vessels waiting to dock and unload, cargo gets stuck on these vessels, leading to shortages in markets and disrupting the procurement of time-dependent materials.

For example, automotive manufacturers in Europe and North America have faced parts shortages because their suppliers in Asia could not ship out on time due to port delays.

The Suez Canal blockage in March 2021 is another prime example of how a single incident can have a massive impact. When the gigantic container ship Ever Given got stuck in the canal, it halted the flow of cargo between Europe and Asia for days. This blockage not only delayed the delivery of goods but also led to a significant increase in transportation costs. The canal is a critical chokepoint, and any obstruction to it profoundly affects global supply chains and shipping routes.

Longer Inland Transit

Longer inland transit times are another byproduct of port congestion. Once the vessel arrives and the cargo is offloaded, the next challenge is transporting it inland via trucks or trains. However, delays at the port often cause a ripple effect, congesting these inland freight networks as well.

This situation was evident during the port congestion crisis at the Port of Felixstowe in the UK, where cargo took much longer to reach its final destinations across the country.

In and near conflict zones like Yemen, Houthi attacks on shipping routes through the Red Sea have further complicated the movement of goods. Such disruptions can lead to longer transit times as shippers seek alternative and often less efficient routes to deliver goods. This not only increases the time products spend in transit but also elevates the risk of damage or loss, impacting overall supply chain reliability.

Demurrage and Detention Cost

Financial burdens, such as demurrage and detention charges, also escalate due to port congestion. Demurrage charges occur when import containers are not picked up from the terminal after arrival, while detention fees are applied when containers are not returned empty to the port within the allotted free days. Consequently, businesses face increased operational costs as these charges build up, which are often passed on to consumers.

Empty Containers

The issue of empty containers also worsens congestion at certain ports. In many cases, shipping lines have difficulties relocating empty containers from regions with a trade deficit back to those with a surplus. This imbalance was notable in Australia, where carriers struggled to find enough containers to ship commodities like meat and grain overseas, significantly impacting their ability to trade efficiently.

Top Causes for Port Congestions

A Mismatch Between Port Capacity and Demand:

Congested ports often occur when there is a significant disparity between the demand for shipping services and their availability. This can be attributed to seasonal changes, variations in trade patterns, sudden economic shifts, or unforeseen events. For instance, the COVID-19 pandemic increased the demand for goods from Asia.

At the same time, it caused problems with obtaining enough containers, equipment and workers at many ports. This resulted in an excessive workload and insufficient space for ships in port operations, making it difficult for everything to move smoothly.

Port Infrastructure and Capacity

One of the main factors for ship congestion at ports is inadequate or outdated port infrastructure, including insufficient berthing slots, cranes, container storage, gates, and road access. When these elements are outdated or undersized, they struggle to handle the volume of ships and containers passing through.

For example, some ports may lack space for large ships carrying over 20,000 containers or experience excessive traffic on roads or railways leading to the port.

Port Coordination and Communication

A major cause of congestion at ports is ineffective collaboration among key stakeholders responsible for port operations, including port managers, dock managers, shipping lines, customs officers, truck drivers, train operators, and goods owners. Without unified communication and coordination, processes can slow down and become complex.

For instance, if dock managers neglect to inform ship operators about parking or container locations or if customs clearance procedures are prolonged, it can result in delays and port issues.

Weather and Natural Disasters

Bad weather and natural disasters are major causes of congestion at ports, disrupting operations and compromising safety and efficiency. Storms, fog, snow, ice or floods can obstruct visibility and hinder movement within the port, occasionally leading to shutdowns or decreased activity.

Carriers may also decide to plan blank sailings due to bad weather to avoid delays in the shipping schedules. Blank sailing inevitably poses clear challenges for the shipping industry.

Additionally, as the climate changes, the frequency and intensity of extreme weather events are increasing. Record-breaking heat waves, severe floods, year-long droughts, and wildfires can threaten infrastructure, including docks and equipment, putting personnel and goods at risk.

Human Factors and Policies

Human actions and regulations can contribute to port congestion in both positive and negative ways. Labour disputes, which lead to strikes by port workers and terminal operators who demand better wages or working conditions, can obviously disrupt operations.

Conversely, port authorities may introduce new rules or technologies involving automatisation and digitalisation as well as eco-friendly initiatives to improve efficiency and safety.

Other Factors Causing Congested Ports

• Poor demand forecasting: Inaccurate estimates of vessel numbers hinder preparation for actual demand.

• War or political conflicts: Conflicts force vessels to be rerouted and this causes unexpected port demands. Additionally, these events often result in security measures that slow down the handling and movement of goods, further exacerbating congestion.

• Lack of port handling equipment: Inadequate tools for freight movement can delay loading and unloading.

• Growth of E-commerce: The surge in online shopping amplifies the volume of goods flowing through ports due to the high number of online orders.

How to Avoid Port Congestion?

Even with the many challenges that port congestion brings, companies can use some strategies to keep goods moving smoothly and on time from one place to another.

• Free-flow container delivery: Streamline operations by allowing truck drivers to access containers directly in front of them, minimising congestion.

• Effective communication: Maintain regular communication with shipping companies to inform them about container arrivals in advance, helping them plan for potential delays.

• Distribution across multiple vessels: Reduce logistics pressure by distributing freight across several ships instead of relying on a single vessel, minimising the risk of delays impacting entire shipments.

• Expansion of ports: With increasing demand, larger ports are essential to accommodate more ships daily, leading to reduced congestion.

• Designing products with DfSC in mind: Design for Supply Chain (DfSC) provides practical techniques to optimise a product’s design to integrate it with the supply chain. DfSC proposes making changes in the design to improve the overall logistical efficiency of a product.

Conclusion

In conclusion, addressing port congestion requires a multifaceted approach. The shipping industry needs to adapt, plan ahead and enhance efficiency through improved coordination, expanded infrastructure, and innovative strategies. This will ensure smoother operations, reliable delivery times, reduced costs, and a stronger global supply chain. The goal is clear: keep cargo moving efficiently to meet the world’s economic demands with intelligent, scalable solutions.