TVF Insights: Supply Chain Disruption

Jun 25, 2021 | News

TVF has been monitoring supply change disruption and rising costs closely and wanted to provide an update on what we have learned and steps we can take together to help navigate this ongoing issue.
Port Congestion is improving in some ports but worsening in others.  According to the Northwest seaport alliance the number of vessels in the port of Los Angeles has decreased by more than 50% while the number of vessels in the port of Oakland has increased by more than 25%.  While this is a positive signal, port congestion is still a major issue that is disrupting the supply chain.
We are also seeing overall transit time increase in every leg of shipment of goods.  A recent report from Flexport illustrates transport times have more than doubled this year.  However, schedule reliability is set to rebound, albeit slowly.  Carriers continue to focus on service levels and port congestion will continue to slowly dissipate.
Throughout the supply chain we are seeing some positive signs, but it is clear these issues will continue to impact freight costs into the foreseeable future.
In addition to transit delays and increased freight costs we are also experiencing price of goods increases as demand growth outpaces supply growth.  According to our industry research on supply and demand growth over the last 20 years, demand (or global throughput) has increased at a rate of 6.6% while supply (carrier vessel space) has grown at a greater rate of 8.2%.  However, according to recent trend that supply and demand balance is tightening, and the growth of demand will outpace supply through 2022.  We expect this shift will further exacerbate the cost increases we are seeing for raw materials.
With freight costs rising exponentially, transit delays, and raw materials increasing, this year brings many challenges. TVF is fortunate to have a vast supply chain to ensure our customers maintain the most competitive pricing possible. Still, it is inevitable we will have to make some pricing adjustments based on current market conditions. We encourage all of our customers to contact us to understand the impacts and to talk through the best solutions so you can thoughtfully plan for the months ahead.