Circumnavigating supply chain challenges
How UNICEF overcame major disruptions to the global container shipping industry to maintain uninterrupted delivery of critical life-saving supplies.
The long-term consequences of the COVID-19 pandemic on logistics are beginning to show. A major disruption to the global container shipping industry has challenged the delivery of critical life-saving supplies, including medicines and water, sanitation and hygiene supplies. UNICEF has met the ensuing reality of reduced shipping capacity head on with an agile interim strategy to overcome the difficulties and look for alternative solutions.
Since early 2020, individual countries have enforced lockdowns, sealed national borders and introduced measures to keep populations safe. Airports closed and passenger services shut down, causing a sudden and major reduction in international air freight capacity. Consequently, shippers shifted to container shipping in an attempt to cover the gap in airfreight.
A surge in e-commerce increased demand for container capacity while the global market supply remained the same. Logistics cannot keep up with this demand: containers are not being unloaded, reloaded and returned to origin points fast enough, leading to container shortages in spite of a ramp-up in new container production.
The imbalance between supply and demand impacts the entire supply chain in negative ways: congestion in seaports in the United States and Europe, and global shortage of equipment and vessels in ports where they are needed such as in China, Malaysia, India and parts of Europe. Some carriers are placing blank sailings just to maintain their schedules. (A blank sailing is a scheduled sailing that has been cancelled by a carrier or shipping line so a vessel skips certain ports or even the entire route).
Confirmation delays on cargo space
Through its global freight forwarding arrangements, UNICEF strives to have its supplies booked and shipped within 10 days from the goods readiness date for sea freight orders. During the ongoing COVID-19 pandemic, this has become a challenge.
“Since November 2020, we have been witnessing severe delays in receiving confirmed bookings from carriers. Delays have reached unprecedented levels, where bookings take as long as two months to be confirmed.”
The disruption in the supply chain translates into increased transit times from port of origin to destinations. By example, a container out of Copenhagen to Port Sudan now takes 60 days, a 50 per cent increase over the typical 40-day period. This can be attributed to severe congestion at many global seaports that significantly delays the loading and offloading of containers.
No risk to COVAX deliveries
In its role as the procurement agent for the COVAX Facility, UNICEF reached a strategic agreement with major carriers to prioritize the booking of all COVID/COVAX-related supplies so that the delivery of COVID-19 vaccines and personal protection equipment (PPE) goes as planned. COVAX activities are thus not being hampered by the constraints to the sea freight market.
While delivery of emergency supplies like diagnostics, therapeutics and PPE has been possible by way of commercial airliners, the shipment of other supplies, e.g. education, water, sanitation and hygiene products, has been jeopardized by the disruption of the global shipping industry.
Mitigation of impact
UNICEF recognized the need for flexibility to mitigate the impact of reduced shipping capacity and maintain uninterrupted delivery of essential supplies to its country offices. The result was an interim strategy with service providers to overcome obstacles and identify alternative solutions.
One such solution was to introduce emergency measures which will deviate process. In a business-as-usual scenario, freight forwarders are required to work with major ocean carriers with whom UNICEF has agreements. In markets like Asia and South-East Asia where capacity is extremely low, freight forwarders are able to work with smaller and local carriers when none of the ranked main carriers have available equipment and space at time of cargo readiness. Also, freight forwarders are now encouraged to source 20-foot containers as opposed to 40-foot containers notwithstanding that smaller containers increase the cost of handling, port fees, etc. This has improved the pool of available containers.
UNICEF’s agile approach has paid off. In the first quarter of 2021, through its global freight forwarding arrangements, UNICEF shipped more than 4,500 Twenty-foot Equivalent Units (TEUs), compared to an average of 3,500 TEUs for the same period in the past three years. Additionally, UNICEF has shipped more than $34 million worth of PPE items out of its Global Supply Hub in Shanghai in Q1, thus clearing most of the backlog caused by the disruption in sea freight.
UNICEF and its partners will continue their dialogue to find stable and flexible long-term solutions. These hurdles will not be the last, and UNICEF remains committed to responding to the needs of children everywhere. “Ultimately our responsibility is towards the world’s children and vulnerable communities, to make them feel safe, protected and ensure no one is left behind . We have made so many gains over the years, especially in terms of immunization and we will do our utmost to maintain these investments and to keep these programmes on track. with our global logistics and procurement capacity we will ensure that critical supplies are getting to where they are needed most, to children and their families, to health and social workers and to teachers”, says Etleva Kadilli.
