The availability of passenger flights carrying cargo has dropped dramatically for Australian importers in the past year. Andrew Coldrey, C.H. Robinson Vice President Oceania, says airfreight charters are offering another option to meet consumer goods demand this Christmas.
C.H. Robinson has spent a billion dollars over the last ten years on technology to provide the most optimised solutions for its customer’s supply chains.
Andrew Coldrey, Vice President Oceania, says COVID disruptions present flow-on challenges, and the most data-informed strategies are required to overcome them.
In 2019, the global 3PL provider announced a commitment to invest $1 billion in technology advancements over the next five years, doubling its previous investment.
“The past eighteen months have validated the company’s decision to double down on its tech investments,” says Andrew. “There are so many information gaps in supply chains, and relying on third-party-provided information is often essential to overcome disruptions. This has driven us to do a lot more of the information-building ourselves.”
Andrew says one key challenge comes from more airlines diverting passenger planes to the northern hemisphere, where international passenger travel is on the rise. These planes carry around half of all air freight.
“Global carriers have recently announced they would cease passenger flights to Australia until at least early next year because they can make better use of crew and aircrafts in the northern hemisphere,” he says. “With Australia’s state governments calling for a reduction in the passenger cap limit, restrictions on incoming passengers meant continuing service in the short term was not viable.”
American Airlines decided in July to suspend all flights into Australia across September and October.
The announcement is symptomatic of the challenges faced by Australian importers. With less passenger and freighter flights, businesses may have to think outside of the box to get their product onto Australian shelves.
“Announcements like these from leading airlines further reduces the options, and charter flights might be the only way importers can shift their goods before Christmas,” Andrew adds.
Andrew says C.H. Robinson has increased the number of charter flights into Australia, often from the US, to about two per week to service its client demand.
“Traditionally, we use charters for more project-specific shipping – for instance, moving really large pieces of equipment for time-sensitive medical emergencies,” he says. “But now we’re finding charter flights are sometimes the only means of ensuring continuity of supply for goods that would never normally fly in charters – and often wouldn’t fly airfreight at all. It’s one way we’ve been able to add capacity in a market that’s incredibly tight.”
Andrew says importers are being additionally squeezed because demand in the ocean freight market is far outstripping supply.
“Out of Asia we are about 45 per cent up in volume on last year, so we’re moving more cargo,” he says. “The demand is even stronger than that. It’s just maxed out.”
He notes that freeing up space on cargo ships isn’t an overnight fix, either.
“There might be a shift towards more local manufacturing, reducing demand such that it ends up matching supply a little bit better,” he says. “There are more ship builds coming online, but they’re not scheduled until 2023 and 2024.”
The domestic ocean freight market is also under pressure along the Australian coast.
Andrew notes that many coastal shipping carriers have either stopped services for the time being or significantly reduced capacity.
“Part of that decrease is really to do with equipment,” he says. “There’s such a desperate need to get equipment back into Asia, carriers don’t want to tie it up on the coastal route. Even though the equipment is moving back that way eventually, a container that moves from East to West Coast will still be out of action while it’s delivered and then unpacked and returned.”
The domestic ocean market is shipping around 20 per cent of its usual volumes, necessitating more reliance on rail and road.
However, Andrew sees the dramatic drop in coastal shipping as a short- rather than a long-term trend – the result of lingering COVID disruptions that will in time be at least partially alleviated.
“We do expect interstate ocean freight to return and quite a few of our partner carriers have indicated that services will be resuming in the shorter term, not the longer,” he says.
Lifting rates at ports is another disruption currently challenging the industry. With the majority of lift capacity utilised for import cargo, Andrew says there’s not enough slots at terminals to load outbound coastal boxes.
“These disruptions are intertwined,” he says. “A lot of it has to do with the quality of information – so we’re being really proactive in helping customers plan ahead.”
Andrew says C.H. Robinson provides information in such a way that it can be understood by every part of a business – not just the supply chain operators.
“We give the tools to people in supply chain so they can then explain to the rest of the business what the impact is,” he says. “An organisation’s finance department, buyers, and marketing people need to understand just how significant supply chain challenges are. Instead of focusing on what a business’s lead times were, or what a carrier has promised, we describe the reality of how long things are actually taking, so we can forecast and predict the impact of different disruptions.”
The drought in supply on ocean and air freight means importers need to organise their supply chains months in advance to be prepared for the Christmas rush.
“Our message to importers, especially in the retail space, is to make airfreight decisions early,” Andrew says. “There is capacity if you know where to look for it.”
C.H. Robinson reports that current disruptions can extend lead times by more than a month for some customers.
“Preparing solutions as early as you can also reduce costs for importers,” Andrew says. “The more flexibility you have, the more options you have. But if you leave it too late, you’ll be more desperate – and left facing higher costs in a hotter market.”
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