airplane grounded

25 Jan 2022

Omicron clips wings of airfreight market

Denys Hobson

Denys Hobson

Logistics and Pricing Analyst, Investec for Business

Lessons learnt in 2021 should help the logistics industry cope with further challenges in 2022.

 

There is no arguing that the last 12 months has been the most disruptive year on record for global supply chains. With the emergence of the new Covid variant, Omicron, numerous airlines had to suddenly cancel flights and services to, and from, Southern Africa, and elsewhere.

This resulted in additional strain on an already turbulent environment. The immediate retraction in capacity has seen extended delays, as agents have had to scramble to find alternative flight options to move cargo which had already been booked or tendered.

The real bottleneck, however, has been at the airline handling facilities. Numerous hubs have already been struggling with labour shortages and storage capacity, and with the added impact of Omicron, cargo backlogs have quickly built up. Not only is cargo missing departure deadlines or being routed to alternative hubs, but lead times and costs have also been increasing.

From a sea freight perspective, the challenges have been non-stop – from the Suez Canal blockage, equipment shortages, the Transnet cyberattack; to Covid outbreaks in ports and on vessels, record high freight rates and constant shipping delays – the battle is ongoing. While there have been recent pockets of capacity and equipment improvements, demand is expected to surge once again as the pre-Chinese New Year shipping rush started from mid-December.

Global capacity is now down approximately 12% mainly due to vessels being caught up in berthing delays caused by port congestion and bottlenecks at all major ports. This means that capacity across all trades into South Africa remains tight and sea freight bookings now need to be made three to four weeks in advance of the required shipment date. For retailers gearing up for the New Year and the Back-to-School run in January, it became crucial to find alternative ways to get shipments landed in time to ensure they didn’t lose out on sales over this key period.

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I spoke to MoneywebNOW's Simon Brown about what we can expect to see impacting supply chains in 2022.
Erratic supply chain

This new year will no doubt still present unexpected challenges, but hopefully the lessons learnt from 2021 will place stakeholders in a stronger position to effectively handle and circumvent whatever 2022 brings. Expect global supply chains to be met with a few difficulties in 2022, and most notably the first two to three months are likely to be exceptionally challenging. Strong pre-Chinese New Year demand is expected for both air and sea, which we already know by now will drive freight rates upwards. Sea and airfreight schedules in general are likely to be erratic, causing unpredictable lead times.

Market conditions are expected to slowly start improving post the Chinese New Year period and we could look forward to a more stable environment from the second quarter. However, retailers will need to pre-plan for any eventuality, as we cannot predict everything. Take 2021 as a learning – know that anything can happen when you least expect it to; and always be proactive in your strategies as it can be the difference to incredible wins or substantial losses.

This article originally appeared in Retailing Africa.

  • Disclaimer

    Investec For Business, a division of Investec Bank Limited. (Reg. No. 1969/004763/06) Investec Bank Limited is an authorised Financial Services Provider (FSP 11750) and a registered credit provider (NCRCP9). A member of the Investec Group. Import Solutions is a business unit of Investec for Business.

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