As the Russo-Ukraine war is causing serious ripple effects in the global supply chain, key players are looking at alternatives.
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Beyond rising energy prices and the horrific humanitarian calamities in Ukraine, the rest of the world is set to suffer from the effects of the Russo-Ukraine war. Due to the war, freight forwarders are scrambling to test alternatives to popular China-Europe freight routes that pass through the Russian territory. As a result, European forwarders have suspended bookings through the country. Chinese traders are hastily looking for alternatives. Per local media, a number of traders have halted orders as they evaluate the potential impact of sanctions, including insurance and payment settlement. Due to Russia’s war sending tremors through the global economy, companies will no longer be able to separate business from geopolitics. Organizational leaders cannot ignore the impact of such ructions on their own business operations and people.
Issues with Rail Transport
Trains are still running along the Trans-Siberian route, but Russian railways have been sanctioned so European forwarders have suspended bookings through the country. Kuehne + Nagel International AG, one of Europe’s largest freight forwarders, isn’t accepting rail cargo from China to Europe. The weekly China-Europe train from Shanghai has reportedly seen a 40% drop in bookings and its frequency reduced. Similarly, the Silk Road freight train from Vietnam has been suspended. The service, which operates via Zhengzhou, was established in July 2020 following surging demand in Southeast Asia for non-sea or air cargo options and heavy truck congestion on the Vietnam-China border is now not as busy as expected. In 2017, about 40 freight routes connected China to Europe. In 2021, the number has almost doubled to 78 lines, reaching 180 cities in 23 European countries. Beyond routes and cities, the number of trips has increased too. In 2016, there were only 1,900 trips; that grew eight-fold to over 14,000 trips. The value of goods transported by the freight trains skyrocketed as well, from US$8 billion in 2016 to US$74.9 billion in 2021. This trend was persistent during the pandemic as well as the value of goods transported rose by 50% in 2021 alone.
Maritime Most Viable Alternative
As a result of disruptions surrounding rail freight, traders are opting for a mix of land and sea transport as alternatives. Different routes through the middle or southern corridors, largely through Kazakhstan, Azerbaijan, Georgia, Turkey via the Caspian Sea, or Romania via the Black Sea are being considered. Due to this, the conflict is adding to congestion at some of the biggest ports, putting further pressure on global supply chains that are still reeling from pandemic-induced manpower shortages. These routes could also translate to longer transit times and freight forwarders could potentially face increased congestion.
The maritime industry needs to be as efficient as possible to mitigate increased port congestion and riotous maritime traffic. This issue is further heightened by labor shortages and staffing complexities. This has brought about a need in the market for technological solutions for ports and ships. Human decision-making will be imperative for shipping freight well into the future, but automation technologies that focus on cost savings and workplace safety are becoming increasingly popular in the maritime industry. Although the pace of technological adoption in ports and container terminals has started to accelerate, solutions implementation has happened a lot quicker in sectors like warehousing. As less than 5% of container terminals are currently automated, there have been plans put in place in major ports to speed up the automation process. Ports can automate several areas of the chain:
- Yard Management: This includes berth, storage, yard, and labor planning.
- Port Gate: Automating processes like port gate processes like security, weighbridges, customs, and immigration can speed up a lot of processes in port operations.
- Stacking Cranes: Automated Stacking Cranes (ASCs) use LiDAR-based systems to position containers within 50mm of their intended position.
- Horizontal Transport: When the ships are ready for loading, Automated Guided Vehicles (AGVs) or ASCs carry the containers from the stacks to the quay.
Apart from giving ports and terminals the ability to handle larger volumes, automation also enhances the reliability, consistency, predictability, and security of operations. Deployment of automation solutions in ports could undeniably mitigate short and term disruptions in the global supply chain to a large degree.