Sanne Manders, Flexport COO, untangles the holiday season and talks about how some retailers have come out ahead in the holiday season.
Video Transcript
– Welcome back. Supply chain constraints and shipping concerns remain front and center this holiday season. For more on the situation as it stands now, we’re welcoming in Sanne Manders, Flexport Chief Operating Officer. Sanne, thank you so much for joining us this afternoon. As we’re in the thick of peak season for holiday shipping, we’ve been talking about port congestion throughout the second half of this year now, but how have conditions been faring now compared to the past previous several months?
SANNE MANDERS: Yeah, and I think it’s a bit of a mixed story. So if you’re looking at it, the situation on the ground is improving, but on the water, it’s not yet improving. And the analogy is actually pretty simple, and it looks like a traffic jam. The front end of the traffic jam starts driving, where the back end is still backing up. And, you know, the things that we’re looking at right now are container dwell times. Container dwell times that are– that is, containers that are sitting in the terminal, which you see right now in the image, and how long are they sitting there.
And the board of LA just announced that long dwelling containers, so those are containers sitting longer than nine days, have been reduced by 60%. And we see that in our own data as well. We do a little bit better at just over 70%, but we see a similar trend. On the other hand, we see more vessels waiting, and that now just grows to hundreds of vessels that are waiting to be admitted into the ports for unloading.
– There are stories about big-box retailers here in the United States trying to get their own army of truck drivers to get these containers to the stores. How well is that working?
SANNE MANDERS: Well, I think there is no one story, right? And the more cloud you have, the bigger you are. You can organize yourself a little bit better and can get the capacity deployed to help. So we typically see that the big box retailers do a little bit better than the smaller importers. But the reality is also, you know, there’s not much that you can do, and it’s also not that there is like you know all of a sudden armies of truckers coming from anywhere else in the country to help these big retailers out.
– Well, in addition to those big boxes retailers you were just talking about, are there any specific companies or industries that you’ve seen really navigate these concerns exceptionally well? And if so, what were they doing that worked?
SANNE MANDERS: Yeah, so again, it’s much more about how resilient was your supply chain and how much did you anticipate here. There are companies that are doing better. Companies that are doing better typically are more realistic about their expectations and just work with those expectations. They are not fighting against the expectations. They’re working with it, and they take the consequences of that. That means, you know, longer shipping times, means more working capital, which we see again in increased demand in our Flexport capital products.
We see also companies that are diversifying better using different routes, using different modes, more air freight as a result. Airfreight has been growing. We see it in our own numbers as well. We almost doubled this year. And companies think more end to end. Where is the real bottleneck? And also, really ruthlessly, prioritized. What are the SKUs that I need to make the holiday season, and what are the SKUs that I actually don’t need for making the holiday season? What I do think is the general, you know, the silver liner or the red line here is, like, you know, what are the companies that are doing better are the ones that are more resilient, and they’re typically the ones that have more visibility. They’ve digitized their supply chain, and therefore, they’re quicker to act.
– I heard an interview with the CEO of a furniture company in the southeastern United States talking about what you just said, but they also in talking about those containers. The gentleman talked about the fact that at one point it was $8,000, sometimes those containers, the shipping fees went up to $14,000 as high as $20,000, $21,000. I don’t know what it would have been in a normal time. I suspect less than $8,000. Where does it stand right now?
SANNE MANDERS: Yeah, and I can tell you that. You know, it sits roughly right now for China-based ports to the West Coast around 14,000. The indices will show lower, but you typically pay surcharges for getting equipment. So it means containers were getting guaranteed loading. So you get to like, let’s say, $13,000 to $14,000. In a normal time, let’s say, the same day in 2019, you would have paid 2 and 1/2 thousand dollars. So we’re still looking at a 5x, but it came down from, let’s say, the high teens or low 20s. So it’s a bit lower. The air freight market, though, shows exactly shows only an upward trend. We’re now looking at prices between $14 to $17 per kilogram for similar routes.
– We’ve been hearing some reports as well about reshoring taking place for companies and manufacturing, especially because of these shipping concerns and costs and delays. Is that a trend that you’ve been seeing and tracking? And if so, is this something that might continue into next year and beyond?
SANNE MANDERS: I have not seen that much reshoring. I’ve seen a little bit more nearshoring, so Mexico and Latin America. It is something that has been going on for a longer period of time. The tariffs that were implemented a couple of years ago already changed the game a little bit, as all of a sudden the labor costs were less important, and I could do it more nearshore.
Keep in mind that within the US– and we heard the previous speakers talking about unemployment rates– there is not that much labor that you can deploy on manufacturing your goods. Also, know Asia has taken over all the IP on how to manufacture goods. So it’s not that easy to all of a sudden say, like, OK, let’s do it then at home. And we’ve seen it the same with the tariffs that were implemented. It wasn’t that easy to move it to Southeast Asia from China. There’s a lot of IP in manufacturing.
