Shipping and logistics businesses could be facing a Christmas crisis as airlines experience a significant shortage of cargo capacity.
As the festive trading period gets underway and business owners attempt to increase the volume of stock on their shelves, transportation space is at a premium – the likes of which has not been seen for years.
With extensive experience in the shipping industry, Safeguard asks, what is causing the crisis?
A lack of capacity
The significant reduction in available freight capacity is being fuelled by the declining value of sterling, which dropped amid economic uncertainty after the Brexit referendum. As a result, Continental Europe is increasingly using the UK as a transhipment point.
In addition, the fast-moving eCommerce market is continually demanding faster shipping times and orders are taking up more capacity on aircrafts than ever.
Finally, there is the general year-on-year upturn in cargo levels, which can be as much as a 30% increase on the same period last year – and all at a traditionally busy time of year.
Knock-on effects
Inevitably, the lack of space is increasing rate levels for both new and existing bookings. You may have experienced airlines applying ‘Dynamic Pricing’, which gives priority to the highest rates paid. Urgent deadlines are therefore forcing shippers to enter competitive auctions and outspend their budgets in an attempt to reserve a space.
Suppliers are experiencing difficulty in booking onto major routes. Many routes are fully booked up to 10 days in advance, with premium or must-ride upgrades the only option.
Retailers, warehousing, shipping and cargo transit businesses could all be affected as the issue knocks the supply chain.
What can businesses do?
Shipment planning is critically important. At Safeguard, we recommend advance scheduling and avoiding last-minute bookings where possible, as these will attract the biggest premiums.
In some cases, emergency logistics services are stepping in to pick up the shortfall, but be warned they will charge significant premiums.
In an industry where things can change up to the last minute, Safeguard suggests that air freight business models will need significant changes to keep up with future demand.
Specialist transit insurance from Safeguard can help to protect your stock, cash-flow and business. Experts in shipping, cargo and marine risks, talk to our insurance experts on 08456 888 284.