Logistics Challenges to Continue in 2022By Alfonso Núñez | Fri, 01/14/2022 - 15:49
Q: What benefits do SPARX’s transportation services in air and ocean freight offer clients in terms of cost, sustainability and risk minimization?
A: Sparx Logistics is a privately owned company headquartered in Hong Kong. The company was launched to support customers in Asia and North America and has grown to Europe, the South East Asian region and the Americas. Mexico came on board in 2021 and we just recently started ground operations with the US. Because of our strong presence in Asia and particularly in China, we can offer our customers a wide variety of shipping options. always focusing on competitive costs and flexibility. For example, in terms of equipment, if we do not have availability for a certain type of container, such as 40 High cube, we can switch to 40 or 20-foot containers. We also offer our SeaXP service, which is a premium service ensuring faster processing at origin, priority pull of containers and access to confirmed capacity. This premium service allows SPARX to offer reliable departure dates and direct routing (whenever possible), ensuring on-time arrival. We also offer origin inspection services, which can speed up the destination customs clearance process.
Q: How does SPARX combine logistics software to create a customized client experience?
A: We offer a completely integrated platform with a seamless process in terms of customization, quotations, operations, billing and financial services. It helps that globally we all work with the same logistics platform, allowing our offices to share information instantly between each location. That same information is also transmitted to our web tracker which allows customers to view status information related to their containers, including invoices, and packing lists. We pride ourselves on being a midsized forwarder with a major focus on customer service and personalized approach. Other companies usually rely mainly on their IT solutions and basically just ask their customers to go online and track their shipments. We do not do that. We are happy to talk to our customers. We want to engage with them and hear from them directly and without filters. Of course, our web tracker is a great additional tool, but it is just a tool and should never replace direct communication.
Q: What other global supply chain consulting services does SPARX specialize in and which have been the most in demand throughout 2021?
A: Recently, we have seen many requests related to origin inspections. The origin inspection services we provide allow the customer to simplify the customs clearance process in Mexico. By validating the content of each container (including the type of products, quantities, packaging, content, origin, etc.) we can already prepare all necessary customs documents so that once the container arrives in Mexico, it can be cleared immediately. Globally, there is a great deal of pressure on ports, with increased volumes and a great deal of congestion – and this is also true for Mexican ports in particular Ensenada and Manzanillo where we see a lot of delays. Therefore, if a Mexican importer decides to complete an origin inspection before loading the goods, it already has certainty of what is being shipped and that goes a long way in speeding up the process at destination.
Q: What is the state of the congestion at US and European ports that has resulted in service delays to China?
A: Unfortunately, the levels of congestion are still high and, in some cases, even getting worse. Just recently we saw over 100 ships at anchor outside of LA/LB port in California. So yes, there is still a very high level of congestion in terms of port handling. We also see many delays in terms of containers repositioning (especially going back to China) and with trucking power at destination ports (for example on the West Coast). All of this results in shortage of containers where they are needed most, at origin ports in China. At some ports, we may be struggling to find 40 high cube containers, at other ports we may have a shortage of 20-foot equipment. To our advantage, SPARX Logistics has its own offices at all major ports in China, so thanks to our hard-working teams we are usually able to solve those issues for our Mexican customers.
In any case, we do not expect to see any improvements during the first quarter of 2022, at least not until a few weeks after Chinese New Year. In March we may see some easing in terms of port congestion and hopefully by early Q2 some normalization of carriers’ itineraries.
However, we still have many unknowns, starting with the current COVID wave of infections. Recent power outages in China have also impacted productions and manufacturing facilities, leading to sudden fluctuations in cargo volumes. Another big question mark for the second half of 2022 relates to the labor negotiations going on at LA/LB ports, with the potential risk of a strike. Some of us that have been in the industry for a while will surely remember the longshoremen strike at the ports of Los Angeles, which led to its shut down for weeks. Imagine what would happen today if that happened again.
Today’s shipping industry, and especially containerized shipping, remains a question of supply and demand. If there is more demand than supply as is the case today, then of course shipping costs will remain quite high, port congestion will continue, and supply chain bottlenecks will be hard to overcome. However, if demand softens a bit and we see a return to pre-pandemic consumption patterns, where people spent a sizable portion of their income on services instead of just goods, we may see an improvement in terms of supply chain efficiencies. And by 2023 thanks to the high number of newly built ships entering service, we should definitely see an easing in terms of container rates and overall shipping costs.
Q: With the rise in e-commerce, which sectors do you think will most benefit within your portfolio?
A: We definitely see a very interesting development in the market. We have had the pleasure of supporting some new customers in Mexico that are very active in e-commerce. These are relatively new companies that offer online retail sales of household items, electronics, home improvement, kitchenware, and furniture. These are also the commodities that have had the strongest increase in volumes due to the pandemic and its stay-at-home restrictions. Although the pandemic will end, hopefully sooner rather than later, we believe this trend is here to stay and online retail sales will continue to increase year after year. SPARX Logistics is therefore the right partner for customers looking at ensuring timely and cost effective sourcing of products.
Q: What is your outlook for 2022?
A: In 2022, we do not anticipate any drastic change in market dynamics until early Q2. Which is why we are advising our customers to book their shipment at least 4-5 weeks ahead of cargo ready date and already plan their Q2 production and shipping forecast. As we mentioned earlier there are a lot of moving pieces in the industry. Every day, we try to preempt the market and make sure that we are well positioned, no matter what happens, to be able to support our Mexican customers the best way we can. It is our core mission, and all of us at SPARX Logistics Mexico take it very seriously.