CHECKINGIN
Vol. 42, No. 2 February 2022 THE MAGAZINE FOR DEMAND-DRIVEN ENTERPRISES www.inboundlogistics.com
Bullwhip or Just Bull?
STAFF
PUBLISHER Keith G. Biondo
publisher@inboundlogistics.com
A re shipping lines pricing themselves out of business? Blame the bullwhip effect, a distribution channel phenomenon in which demand forecasts yield increasing swings in inventory. Let’s take that idea a bit further. Financial pressures on publicly traded companies drive short-term policies that please The Street analysts to satisfy investor expectations. Yielding to those pressures sometimes runs counter to long-term company
EDITOR Felecia J. Stratton
editor@inboundlogistics.com
SENIOR EDITOR Katrina C. Arabe
karabe@inboundlogistics.com
Jaclyn Ix jix@inboundlogistics.com
PLATFORM CONTENT MANAGER
CONTRIBUTING EDITORS Sandra Beckwith • Merrill Douglas Karen M. Kroll
CREATIVE DIRECTOR Jeof Vita
jvita@inboundlogistics.com
Keith Biondo, Publisher
DESIGNER Nicole Estep
nicole@inboundlogistics.com
and customer bene ts, especially when you raise prices tremendously. And examples abound of capricious actions by U.S. and/or foreign governments that give the global business community ts and starts, and then ts and stops. Both factors have motivated companies to take a strong hard look at considering locating supply and production close to where the bulk of the buying market is. Inbound Logistics has focused on the bene ts of reshoring or nearshoring for more than the past two decades. During that time, many companies took action. Many others did not. Recently, there has been more talk in boardrooms about reshoring and nearshoring and even more action—pandemic lessons learned. But those fundamentals were there long before the virus and the chip shortage, despite the strong and compelling siren song of “cheap labor.” But now, transport lift rates from low-cost labor regions to the consumption markets have risen dramatically. For some, those increases have eclipsed the low-cost labor bene t. In January 2021, the average price of a 40-foot Shanghai container was $4,535. In January 2022? $5,431. In Ningbo, $3,359 in January 2021 versus $5,633 in January 2022, and in Qingdao $4,509 in January 2021 compared to $5,349 in January 2022, according to Container xChange data. Are shipping lines riding bull market pricing now, forgetting they are motivating a whipping as global reshoring and nearshoring dents future growth? Yes. And it’s all because of the high costs of shipping, says Stefan Pierer, CEO of Pierer Mobility, in a recent Bloomberg report. “The logistics costs to ship stuff from China to Europe currently are 10 times what they were before the pandemic, and they won’t fully come down again,” he says. “To ship products around the globe, given those costs, you need a continental supply chain. We will change the system.” When you add the explosion in transport lift costs to the other motivations, there is clearly a bull market in reshoring and nearshoring as global supply chains recon gure. But nancial pressures on companies are strong. As things normalize, and transport prices come down, will reshoring be long-term company policy or just another example of the bullwhip effect? n
Amy Palmisano apalmisano@inboundlogistics.com
DIGITAL DESIGN MANAGER
PUBLICATION MANAGER Sonia Casiano
sonia@inboundlogistics.com
CIRCULATION DIRECTOR Carolyn Smolin
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Inbound Logistics supports sustainable best practices. Our mission is rooted in helping companies match demand to supply, eliminating waste from the supply chain. This magazine is printed on paper sourced from fast growth renewable timber.
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4 Inbound Logistics • February 2022
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