Imports Via the Panama and Suez Canals Face More Trouble
The risk to inventory availability due to shipping problems continues to be challenging. Historically, the Panama Canal averaged 38 ship transits a day. This reduced to half that and now averages 24 a day. The challenge is that Gatun Lake which provides the water for the canal has been badly hit by climate change and the draft in the canal has had to be reduced. 40% of US imports come through the canal. Some shippers are bidding for priority slots at auctions which command a large premium, estimated at $235m to November 2023.
The alternative for Far Eastern imports is to transit through the Suez Canal. This adds an average 10 days to the transit time and insurance costs rise substantially due to missile risk. Avoiding the Suez Canal adds 6 to 9 weeks to the shipping time. The Panama Canal situation is not expected to improve significantly until October/November when the heavier rain season normally starts.
How do retailers plan inventory availability in these circumstances. Order earlier and accept the increase in inventory carrying cost? Delays in shipping increases forecast error and require more safety stock or acceptance of higher lost sales. Can your merchandisers handle this level of complexity, or do they need upskilling to protect your bottom line?
You can drill down deeper on this topic in our Retail and Consumer Goods Industry WIKI and EPSS if you or your company is a current licence holder.
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Posted by Brian Hume
8th March 2024
