Preparing for the Shanghai Lockdown Bullwhip Effect
When the Chinese government locked down Shanghai and Guangzhou in early April, this resulted in a 16% drop in export containers. Bloomberg reports that only 20% of Chinese truckers in these ports are operating. Some analysts expect container volume to drop even further in May, some estimating as much as 50%.
Currently, U.S. ports are still digging out from the Covid backlog. Looking forward and allowing for 27 days of transit plus 7-10 days for Chinese imported goods to be drayed and warehoused, there could be a massive surge of freight that arrives in the U.S. starting in early July. Usually, this is the start of the holiday stock-up season. Drayage, rail capacity, and warehouse space could all be real concerns. Now is the time to be answering the following questions:
- What are my current inventory levels?
- Can I handle a surge of products in July and August?
- Do I have enough warehouse space to meet my needs?
- If rail capacity gets overloaded, do I have a workable transload strategy?
This has been the most demanding market for importers in their lifetime. Now is the time to make your summertime plans.