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Supply chain congestion not the only serious issue facing importers

Supply chain congestion not the only serious issue facing importers article image

Apart from supply chain disruption, Australian importers are facing some major challenges in coming months, explains shipping and logistics expert David Aherne...

Australia is predominantly an importing country – it relies heavily on imports from China.

With regions from the southern city of Shenzhen to the northern province of Jilin experiencing stay-at-home and travel restrictions since March this year, some Australian importers are beginning to take their manufacturing needs elsewhere.

Although there has been discourse surrounding this topic for years, with current manufacturing delays in Shanghai increasing to upwards of three months, it is anticipated that more and more manufacturers will gradually move their business to neighbouring Asian countries to help rectify such delays.

We know first hand that global lockdowns have had a detrimental effect on the supply chain.

However, we have witnessed COVID-related restrictions in China, having a seemingly greater impact on Australian importers due to the country’s many manufacturing ties.

Although we are observing inflation rising rapidly in Australia, Australian consumers will not experience the full result of these supply chain delays until Q3 (July) of this year.

It is not only those that require finished commodities from manufacturers in this region that will be impacted by delays, but also Australian importers who rely on parts being manufactured there.

Potential stock shortages

Australian consumers who are on the hunt for electronic goods, such as computers and fridges, should expect longer lead times for orders and potential stock shortages because of this.

No longer is supply chain congestion the predominant cause for concern for Australian importers – instead, manufacturing is.

Some factories are struggling to produce due to stay-at-home and travel restrictions. It will take months of uninterrupted production to meet consumer demand and fulfil backorders.

Last year, we witnessed some Australian companies stockpiling items, in fear of logistic delays and transport rates rising again.David Aherne 1

Freight rates continue to rise

However, these contingency plans have practically become redundant, as the industry is being hit with curveball, after curveball.

First a global pandemic, then the Suez Canal blockage, and now the crisis in Ukraine – the list goes on.

This week, China will have two public holidays dedicated to Labour Day, May 3 and May 4.

It is unlikely freight rates will remain stagnant, instead, we believe they will rise once again.

The perfect storm has only just begun.

David Aherne is Managing Director & CEO of Across the Ocean Shipping, a leading Australian freight forwarder, with offices in Australia, US and UK.

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