If supply chains are the “heart” of global trade, then cargo operations at maritime trading ports are the coronary arteries — necessary for survival, but prone to blockages. And the last year would have required many trips to the emergency room.
Simply put, volatility is the new normal, and we have to move beyond our traditional strategies that no longer apply in today’s market. To fast-track improvement, leading businesses are implementing advanced technologies like autonomous sourcing to remain agile and resilient.
Under Pressure: Rising Costs and Labor Strife
Ports are effectively the middleman of global supply chains, a key link between production hubs, inland transporters, and consumption markets. This is both their greatest strength and greatest weakness. On the one hand, ports are extremely important to the global economy, with over 80% of the world’s trade passing through. On the other, ports are incredibly vulnerable, susceptible to both internal and external disruptions, such as labor strife, shipping-container shortages, and even ships getting stuck in canals.
At present, ports are facing two key issues. The first is the rising cost of port operations. As transportation centers, the cost of port operations — and the cost of shipments to/from ports — is dictated by the supply of labor and fuel, the efficiency of their operations, surrounding natural hazards and man-made risks. Container prices spiked at the onset of the pandemic due to limited capacity and an increase in consumers buying items online. Now, with container prices dropping rapidly, rising fuel costs, the war in Ukraine and a shortage of truckers are straining port resources.
Higher operating costs are adding another layer to a second key issue: labor. Union workers at two of the world’s largest ports are threatening strikes that could potentially shut down trade and local economies. The recent strike at Felixstowe, the U.K’s biggest container port, seeks to address a more straightforward issue: increasing wages to account for inflation. While this strike may increase congestion at nearby ports in the short-term, the strike’s eight-day limit won’t have a lasting impact. But the ongoing negotiations at the Port of Long Beach and Los Angeles on the U.S.’s West Coast could decide the future of ports entirely — and with over a month of talks down, there’s still no end in sight.
With the threat of a total shutdown on the horizon, business leaders have been circumventing the Port of Long Beach and Los Angeles in favor of East Coast locations. Not only does the East Coast have limited capacity to handle the excess loads, but with higher fuel prices, the added mileage will add to the cost of the journey.
Without a resolution in sight, decisions must be made — but they won’t come easy. Businesses need the ability to quickly pivot in the face of port closure or disruption. Autonomous sourcing is providing sourcing teams with the power to overcome sudden obstacles and protect business continuity like never before.
Autonomous Sourcing: A Light at the End of the Tunnel
Although autonomous sourcing can’t stop labor strikes, rising costs or port challenges, it can help sourcing teams react to sudden issues quickly and efficiently. Automated sourcing can remove 90% of the manual work from a sourcing event — helping teams rapidly find superior route, carrier or supplier alternatives in the case of disruption. This agility is critical as freight buyers become forced to move away from annual, strategically negotiated contracts and pivot to spot bidding events.
As most sourcing teams have seen, the bidding process is complex and cumbersome at times — and it’s nearly impossible for employees to manage at the pace and scale of which it’s occurring with ocean freight. When spot bidding tasks are automated, fast and smart decisions can be made while employees are freed up to focus on strategic projects and carrier relationships. Equally important is the impact on autonomous sourcing has on employees’ relationship with their work. Empowering stakeholders to quickly take action frees up buyers from the time-consuming, tactical burden of running RFPs — improving job satisfaction, and results. When it comes to the volatile world of ocean freight, having AI-powered bots take care of re-routing at the first sign of port problems ensures business continuity is protected through operational agility.
Plus, when sourcing teams are making fast decisions to protect operations, it’s critical to not sacrifice quality (or other important criteria) for speed or cost. Automation enables teams to weigh price or delivery speed alongside other factors, such as sustainable sourcing practices, reliability, contract terms, capacity and more. This protects an organization from sacrificing important values in the face of adversity. The result: strengthened resiliency, boosted agility and protected reputation — no matter what gets thrown your way.
Integrating Automation: Industry 4.0
Digital transformation is becoming crucial as we navigate market volatility and disruption. A forecasted recession has many companies looking at how they get maximize their sourcing teams, and autonomous sourcing offers a perfect solution. By offloading the manual burden of constantly running spot bids and quotes to an intelligent bot, autonomous sourcing can help sourcing teams find success when the odds are against them — especially with ocean freight. Ports will always be central to trade — and vulnerability is constantly high. Businesses can weather any storm with the right sourcing technology by their side — fueling quick, smart decisions for operational resilience.
Dylan Alperin is head of professional services at Keelvar.
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