Let's take a look at what logistics does to know what needs to work well. The fundamental mission of business logistics is to get the products (goods and services) to the right place, at the right time and under the right conditions, contributing as much as possible to the profitability of the company.¹ 

To achieve this, it is responsible for processing orders, handling materials (both raw materials and finished products), packaging, transporting the goods, storage, stock control and providing the best possible service to the customer. All this at the lowest possible cost. Costs vary from product to product and from country to country. To get an idea, it is estimated that the average impact of logistics processes in Spain is 10.7% of the final cost of the product.²

To do all this work well, the logistics department must have projections of sales in the coming months, as well as know the production and transport times, in order to know how many materials are needed and when, and organise their transport and storage.

As we know, we are in a highly globalised world, where raw materials are obtained in one area of the planet, manufactured in different places and the finished product can be stored and distributed all over the world from a different location. Until last year, all this machinery was perfectly oiled and running like clockwork, so that the transport of materials arrived everywhere in the right way.

To give you an idea of how it works, the container ship MOL Triumph has a transport capacity of 20,170 TEU (one TEU is equivalent to a 20-foot container), its route starts in Dalian, continues in Asia via Qingdao, Shanghai, Ningbo, Hong Kong, Yantian and Singapore. It will then pass through the Suez Canal and continue on to Tangier, Southampton, Hamburg, Rotterdam and Le Havre. It will then call at Tangier and Jebel Ali on the way back to Asia.³

It is not only the number of containers carried by each of these ships that is important, but also the speed at which the ports are working.⁴ The average time to unload a container depends on the region. According to IHS Markit data, it is less than half as long in Asia as in the US. This may be due to several factors, from the fact that Asia exports more than it imports, to the fact that most ports are more modern. While in the US the average time is about 76 seconds, in Asia it is 27 seconds per container. In Northern Europe this time averages 46 seconds. 

In the route example above, ships leave Asian ports loaded with some products and return to Asia with others. Therefore, to keep the world's logistics and production machine running smoothly, ships must be properly loaded at all points along their routes, and containers must be unloaded at ports and moved to their final destination as quickly as possible. I give the example of a sea route because 90% of consumer goods are transported by sea and therefore well-functioning motorways of the sea directly affect world trade. 

Well, this large and efficient machinery is nowadays broken.⁵ Why? Let's see.

The year 2020 was marked by restrictions on mobility and the confinement of thousands of people. This has clearly and decisively affected world trade in various ways. 

On the one hand, the confinement of people, the closure of production sites and port logistics terminals affected different parts of the world in different ways. Confinements and closures started in China in a very blunt manner, but soon the de-escalation of restrictions began and production sites were quickly reactivated. Elsewhere, such as in Europe, restrictions and closures of production sites lasted longer. This led to an imbalance in the shipping lanes, as ships left China full, but on their return route they were not as heavily laden as before.

As a consequence, there was a build-up of empty containers in European and American ports. In the first few months container shipments from China to the US increased by 12% and US shipments to China contracted by 14%.⁶

Another important factor resulting from confinement is that of changes in consumer purchasing habits. During containment and post-confinement, covid has devastated some sectors, such as hotels, restaurants and leisure. But for others it has been a boon. The World Trade Organisation forecasts world merchandise trade volume growth of 10.8%.7 This implies, according to the Netherlands Bureau of Economic Analysis, that world merchandise trade is 5% higher than before the pandemic, with China setting trade records.⁸ 

In addition, online commerce grew exponentially9 with a consequent increase in the load on global logistics systems..¹⁰

This shortage of containers in China and the increase in world trade has generated, by the law of supply and demand, an increase in transport costs and, therefore, an increase in the price of transported goods.¹¹ Before the pandemic and even in the early months, shipping a container from Asia to the US or Europe averaged around $1,000. By August 2021, prices are expected to be between $9,000 and $15,000. The Wall Street Journal talks of prices as high as $20,000 for rush shipments.  .¹² 

The management and prevention of Covid has indirectly created other problems. For example, the Chinese authorities practice a zero-tolerance policy on Covid. The Chinese Ministry of Transport ordered all ports to have special equipment to deal with foreign vessels and requires their crews to have health certificates or negative tests before they are allowed to load and unload. Chinese ports sometimes have their own rules, depending on the region they are in, and apply extra precautions to the crews of ships that called at ports in declared high-risk countries. "China's zero-tolerance policy is good for the pandemic, but bad for the supply chain," said Dawn Tiura, executive director of the Sourcing Industry Group, a US-based association for the sourcing and procurement industry.¹³

Of course, it is not only the Chinese ports that have established more protocols for Covid prevention, and each country has applied its own protocols, such as the Good Practices on Covid prevention measures and action in the port cargo handling service in Spain,¹⁴ where Aerower's central warehouses are.

These protocols lead to delays in the entry of ships into port, delays in the entry of lorry drivers, stevedores and other personnel into port, as well as major restrictions in the rotation of ships' crews. All this delays unloading and therefore slows down the whole process and the movement of vessels. There is a clear reason for these protocols: by August 2021, only 15%¹⁵ of seafarers are vaccinated.¹⁶

As if this were not enough, with everyone already out of the loop, with the production centres active and despite the prevention protocols, in August 2021 the port of Ningbo-Zhoushan (which in 2020 was the third largest port in the world by cargo volume, with 28.72 million TEU) was closed for 2 weeks due to an outbreak of covid.¹⁷ This stranded ships in port for weeks, diverting ships to other ports and creating traffic jams. 

As if it were not enough to have routes under strain from increased demand, containers in the wrong place and delays caused by Covid protocols, other problems have also played their part in this logistics saga.

The Suez Canal blockage

The blockage in the Suez Canal was also a decisive factor.^18,19 This canal is a technological marvel that saves ships from sailing all the way around Africa to get from Asia to Europe. More than 10% of world maritime trade passes through it. In March 2021 the container ship Ever Given²⁰ ran aground in the canal and blocked all maritime traffic for 6 days.²¹ It has been estimated that it will take months to clear the delays caused by this blockage.

Truckers and Brexit

Believe it or not, the UK's largest freight port is jammed. When container ships arrive in port and get through all the Covid protocols, they find that there is no room at the port of Felixstowe to unload any more containers. But the cause is on land: there are not enough lorry drivers to transport the goods from the port. This is not really new, but it has been made worse by the exodus of drivers from other countries because of Covid and by the restrictions on foreign workers because of Brexit.²²

It is not only the UK that is short of lorry drivers. In the United States, California's ports are also experiencing jams for the same reason. The ports of Los Angeles and Long Beach handle 40% of US container traffic, and dozens of container ships currently have to remain outside these ports²³ while they wait for their turn to enter and unload.²⁴ The problem is such that President Joe Biden is considering mobilising the National Guard to ease the road transport problem.²⁵ In addition, these ports are currently operating 24 hours a day, 7 days a week.

Rush and bad weather

As if all this were not enough, the weather has not helped at all. This winter the Pacific has been battered by the strongest winds since 1948. This, together with the rush to ship as much cargo as possible, with some containers being stowed incorrectly, has had an unexpected consequence. This year a record 1,000 containers have been lost at sea. Although this is not a high percentage in relation to annual container movements, it means financial losses for the companies, on top of all the others.²⁶

I want to fix it, but I make it worse

In a well-meaning effort to speed up processes, shipping companies are now loading ships more heavily.²⁷ Before the pandemic, ships arriving at Long Beach used to carry 4,000 TEU. Today they arrive with around 7,000 TEU, and the ports are not prepared to unload so much cargo.²⁸ This is stressing port facilities and slowing port operations down even more.

Materials are disappearing and prices are rising

All these problems, some major and some minor, are causing a global shortage of raw materials²⁹ and soaring prices. Problems have already been detected in industry³⁰ due to shortages of microchips and semiconductors, as well as plastics, paper, cardboard,³¹ metals such as iron, aluminium or copper, and strategic minerals such as cobalt, lithium or indium. Again, with supply short and demand high, the prices of these materials are skyrocketing on the commodities markets.

To these raw material costs must be added energy costs not seen for years. Gas³² and oil³³ prices are reaching record highs, which is causing production costs to multiply.

¹ Wikipedia. Logística. Retrieved 9 November 2021 from: https://es.wikipedia.org/wiki/Logística#Principales_indicadores_(KPI)_de_la_logística 

² Andrés Sevilla Arias. Economipedia. Logística. Retrieved 9 November 2021 from: https://economipedia.com/definiciones/logistica.html