Retailers Considering Airfreight, Inventory Boosts to Combat Red Sea Dangers

As Houthi attacks continue in the Red Sea, retailers are scrambling to find alternative methods for moving their inventory

Subscriber: Log Out

Global shipping rates are skyrocketing as Houthi attacks in the Red Sea continue. Carriers avoiding the area are suffering from longer transit times around Africa, leading not only to higher costs but delayed deliveries and disruption throughout the global supply chain.

Retailers especially are feeling the hurt, with delayed product deliveries of spring and summer goods, including clothing, footwear, home goods, electronics, patio furniture and pool supplies.

With the approach of Chinese New Year in February, retailers are also feeling a time crunch as they work to get their product out of China before the country shuts down. According to Matthew Burgess, vice president of global ocean services at C.H. Robinson, the ocean market typically sees volume increases several weeks before the holiday as companies move more freight before businesses across Asia go offline for at least two weeks

“These expected volume increases will compound delays that the logistics market is already experiencing,” he said.

Airfreight and LTL ocean shipping to expand

To combat these logistical challenges, retailers are now looking at alternative delivery methods.
With more than 500 vessels carrying seven million containers already diverted from the Red Sea Corridor, Rodney Manzo, founder and CEO of supply chain visibility platform, Anvyl, said the biggest players may choose to avoid ocean shipping altogether.

“What I see is instead of oceans, they’re doing air shipping, which increases the cost, but it decreases the time going from point A to point B,” said Manzo. “If it’s 30 to 45 days on a vessel, it takes you one to two weeks on a plane. That’s the smartest thing you can do if you’re financially able to do that.”

Burgess agrees that traditional air freight is an obvious alternative, but he notes that contingency plans can also include a combination of sea and air solutions, expedited inland services, transloading when cargo arrives at port, and less-than-container load (LCL). He recommends monitoring the spot market, which will provide a good indicator to monitor the industry-wide shift to other modes.

“Since this disruption escalated over the holidays, contingency plans are rolling out slower than usual, but we expect this to change quickly as people are back in the office,” he added. “While air and LCL capacity is easier to come by now, that may not be the case long term as shippers activate their contingency plans.” 

Burgess continued that shippers shouldn’t only focus on individual locations or modes but must look across their entire supply chain and build risk mitigation strategies that support their business amidst an evolving geopolitical climate.

“Even if you’re not currently impacted by the disruption, starting conversations with your logistics provider now is crucial as delays will likely cascade to multiple areas of the supply chain, including surface transportation,” he said. “While disruption is not new in global shipping, each event is as unique as the supply chains operating in it. As the situation is evolving, contingency plans that include plans A, B and C are critical to keeping supply chains moving.”

Retailers may reach for COVID playbook

In addition to finding alternative shipping methods, Manzo expects retailers to take a page out of their pandemic playbook by increasing their safety stock.

Safety stock keeps more inventory in your warehouse, but it also can put a dent in your working capital. Temporarily increasing inventory can buffer retailers to these disruptions for now, but as the pandemic showed, it’s not a great long-term solution.

Manzo adds that while retailers who nearshored and diversified their supply chain during the pandemic are in a better position, these types of disruptions still cause challenges.

“Anytime you have something that’s super unforeseen, that creates a shock in the system… you’re not necessarily going to be ready for that, so there is always lag,” said Manzo. “It’s a supply chain bullwhip effect, essentially, so we’re kind of in some of that lag right now. But they’re way more capable and put more checks and balances in place than ever before.”
Manzo continued, “they’ve seen a disruption, they know what it is, they’ve done something to combat that disruption. That playbook is just being utilized now.”

SC
MR

Latest Resources
2024 Gartner® Magic Quadrant™ for Supply Chain Planning Solutions
The white paper highlights the 2024 Gartner® Magic Quadrant™ for Supply Chain Planning Solutions, offering an in-depth analysis of vendors,…
Download

About the Author

Amy Wunderlin, Site Contributor
Amy Wunderlin's Bio Photo

Amy Wunderlin is a freelance supply chain and technology writer. She has written for several weekly and daily newspapers, in addition to trade publications such as Supply & Demand Chain Executive, Food Logistics and Building Operating Management, among others. She is a 2013 graduate of the University of Wisconsin-Whitewater, where she earned her B.A. in journalism.

View Amy's author profile.

Subscribe

Supply Chain Management Review delivers the best industry content.
Subscribe today and get full access to all of Supply Chain Management Review’s exclusive content, email newsletters, premium resources and in-depth, comprehensive feature articles written by the industry's top experts on the subjects that matter most to supply chain professionals.
×

Search

Search

Sourcing & Procurement

Inventory Management Risk Management Global Trade Ports & Shipping

Business Management

Supply Chain TMS WMS 3PL Government & Regulation Sustainability Finance

Software & Technology

Artificial Intelligence Automation Cloud IoT Robotics Software

The Academy

Executive Education Associations Institutions Universities & Colleges

Resources

Podcasts Webcasts Companies Visionaries White Papers Special Reports Premiums Magazine Archive

Subscribe

SCMR Magazine Newsletters Magazine Archives Customer Service