Increased Shipping Container Costs and Supply Chain Challenges

Manufacturing companies in Mexico, global shipping logistics and supply chain management professionals are feeling the squeeze in moving raw materials and finished goods around the globe.

From soaring consumer demand, the unaffordable spike in container shipping costs and the shortage of shipping containers, to saturated ports with weeks-long offloading times, and a lack of container ships and dock workers.

As a shelter services company in Mexico, CPI has heard from manufacturers all over the world who are scrambling to manage their transportation, procurement and logistics networks while being confronted by unpredictable cost increases.

How much does a shipping container cost?

According to Dewry Shipping service, a 40-foot steel container from Shanghai to Rotterdam now costs a record $10,522 dollars under this current logistics crisis. And if you’ve followed any of your supply chain colleagues on social media, you’ve seen it can be even higher depending on port of call. These cost increases and delays are especially affecting shipping from China to the U.S.

The bottom line is this won’t be resolved quickly so it’s time to prepare now for the holiday season. 

Manufacturers in Mexico Need to Plan NOW for the Holiday Season

Image source: Port Economics Management

Manufacturers in Mexico and suppliers start to ramp up for the holiday season around September. The challenges, delays, and added costs that await you in receiving raw materials and shipping finished goods dictate it’s time to prepare now. These are short-term supply chain solutions. If you are a global logistics and supply chain management professional, it is worthwhile to consider how to build a more resilient supply chain with longer term solutions that can hold up with unpredictable market changes.

1. Purchasing Raw Materials and Components
   Don’t wait! Anticipate up to 2 months in receiving and consider ordering surplus raw materials now.
   For those that are able, consider looking to local suppliers even if the price or MOQ didn’t meet your needs before. With delays and astronomical increases in shipping container costs those local suppliers could be your life blood and will shorten your supply chain. Remember, foreign companies manufacturing in Mexico who work with a shelter company like CPI also have access to the IMMEX program which allows for duty-free import of raw materials.
   
   

2. Warehousing
   If you go the route of ordering surplus raw materials and unfinished goods it’s time to assess your current maquila floor space for warehousing extra raw materials. This is also true for finished goods – if you aren’t able get them shipped in a timely fashion you will need a place to store them.
   If your current facility does not have adequate space for warehousing, start looking to lease an additional warehouse to anticipate surplus raw materials and finished goods storage needs now. It is worthwhile to check with your current industrial park manager to find a possible warehouse space as close as possible to your maquiladora.
   
   

3. Increase Production
   It might seem counterintuitive, but it’s time to ramp up production and get your finished goods in transit as soon as you can. Anticipate delays in reaching your markets and coordinate with your customers about shipping methods earlier rather than later due to bottlenecking at ports and delays while waiting for container availability.
   
   

4. Consider Alternative Transport and Logistics Methods
   Once considered not cost effective, it may be time to consider air freight shipping costs especially with soft or bulkier/odd-shaped items. With the increase in international shipping costs (if you can even get one in a timely manner), the gap is closing between air and ocean freight logistics costs for international cargo shipping.
   
   

Create a More Resilient Supply Chain and Get Closer to Your Final Markets

If your company has experienced any of the challenges below in the last twelve months, CPI's webinar "Breaking Free from China Set Up Your Own Manufacturing Operation in Mexico" might be of interest for you.

• Long delays in shipping finished goods from overseas locations like China
• Increased transportation costs from container and air freight from China
• Difficulty staffing or production slowdowns in China due to COVID-19
• Disruptions in your raw materials supply chain
  
  

Contact us today for a free cost analysis to see how manufacturing in Mexico can reduce risk and costs.