Fashion may be built around navigating rising sourcing costs, but the hikes over the last 18 months have been unheard of, even for those who have heard it all before.
The collective sentiment among those in the supply chain could perhaps be best summed up by Grandmaster Flash and The Furious Five, with their 1982 rap “The Message” when they said: “It’s like a jungle sometimes, it makes me wonder how I keep from going under.”
What that means is, actual capacity is up “something around 30 percent over 2019,” according to Strang. What he calls effective capacity is “far lower.” “You have ocean rates that are 10, 12 times what they were in 2019,” Flexport executive vice president and global head of airfreight Neel Jones Shah added. “You havecontainers that used to cost $2,000 from let’s say Yantian, China to L.A. that are now $22,000 to $25,000. So, you’ve seen this exponential increase in rates on the ocean and at the same time, you’ve actually seen transit times expand dramatically.
More specifically, looking at average air freight rates for Asia to the U.S. West Coast, according to Flexport’s data, 2019 saw costs between $2.50 to $3.50 per kilogram and this year those costs are running between $7 to $10 per kilogram more than double. “We’ve been in this situation now for 18 to 20 months and we haven’t seen the situation materially improve,” Shah said earlier this month. “Just in the past week, rates have gone up more than 10 percent. And I anticipate that over the coming weeks, as demand continues to increase because we’re heading into peak season and capacity gets reduced because carriers have canceled a lot of operations, you’re going to see rates continue to go up.
“I anticipate this current situation definitely bleeding over into the first half of 2022,” he said. “The second half is a little bit more interesting because, as the airlines contemplate their schedules for 2022, a lot of them are anticipating returning flights to Asia, but that also depends on quarantines coming down, restrictions being lifted, Asian countries moving more towards a ‘we have to live with COVID-19 strategy’ as opposed to a zero COVID-19 strategy.
That means fashion companies trying to bring goods in — on top of whatever standard costs — can be paying upward of $250 for demurrage fees if the trucker can’t get the goods in the agreed upon time, detention charges around $140 per container per day because the containers aren’t returned on time, plus empty return fees, yard storage fees if the trucker holds their goods for them , and, of course, a fee for the trucker’s time since waits to collect a single container can run as much as six...
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