Supply chain radar: Peak season, what peak season?
“Global ship operators that normally begin the summer preparing for peak shipping season instead are ...
Poor ocean reliability and high air freight rates are leading to a new focus on sea/air combinations – especially in the run-up to the peak season.
And where once Dubai was the front-runner for the switch between modes, Singapore is also becoming a popular hub, according to European forwarders.
“Since about 2010, rates have been too low for it to work,” said one, “but last year rates were significantly higher and still are.
“If the air cost out of Shanghai is $3 per kg, sea/air can be done for about $2.”
Another forwarder said: “Sea/air is definitely a position now. Services are mature and reliable and we have seen an upturn on garments in particular.”
But it’s not cost alone that is starting to attract shippers.
“Congestion last year meant air freight wasn’t that quick anyway,” said one forwarder. “People were struggling with the reliability of both air and sea.
“This year, look at Felixstowe for example, there is still uncertainty as to reliability. You don’t have to pay full air freight price, but you will get there quicker.”
For shippers though, one of the challenges will be becoming aware of sea/air services. Several forwarders noted that although they were seeing the combination used, it was not necessarily being promoted.
“We’d obviously prefer our customers to use air freight,” said one forwarder. “So we are not promoting sea/air.”
Another added that his company’s sea freight team didn’t want to lose any business to air, so didn’t want to promote it either.
One forwarder noted that the biggest reason for sea/air bookings was shippers trying to reduce delays and the subsequent penalty clauses from retailers if they were late with orders.
“A lot of sea/air is to repair delays from the factory,” he explained. “When shippers are running a week late with production, sea/air is a viable option to recover the delay without taking the full air freight cost. And many importers don’t want freight arriving too early, so sea/air can be taken as a preference.”
Sea/air transit times into Europe from South-east Asia to Singapore are 10-12 days, while from the Far East via Dubai it can be 13-15 days.
Singapore has become more popular recently, especially for South-east Asian exports from Cambodia, Bangladesh and Vietnam, which can fall victim to congestion.
One forwarder said: “Once Bangladesh is congested, it seems to affect the whole region.”
Bangladesh is one of the few countries where sea/air is used as a scheduled service because of congestion.
“Some retailers there use sea/air to Singapore as standard now.”
One forwarder said some shippers were using sea freight to Korea from Shanghai, but “it’s not as reliable price wise”. Dubai was still the most cost-effective, he added.