Textile traders worried by delays in port clearances and rising transportation costs

Textile shippers are increasingly frustrated by problems and rising costs in the global supply chain as Manik Mehta writes from the Heimtextil trade show in Frankfurt, Germany. With the global textile trade poised to further grow, textile importers are worried by delays in port clearances of shipments coupled with rising costs which can blunt their competitive edge. The surge in global textile trade presupposes that ports will work efficiently and clear shipments as quickly as possible, removing logjams and congestion that were seen at ports in recent times. Apparel and textile importers in the United States, for example, were exasperated by recent delays in arrival and clearance of merchandise due to port congestion at California’s Los Angeles or Long Beach ports. Buyers have vented their frustrations over not being able to clear the consignments much ahead of the Chinese New Year on February 19 when most apparel and textile-producing plants in much of Asia are closed for over a week and shipments move at a snail pace. In mid-January, thirteen container ships were anchored at one time at the Long Beach and Los Angeles ports, idling a record number of ships on the water since the ports’ congestion problems began in October. Buyers waited in some cases for as long as one month to get their merchandise cleared from the docks. For some buyers of seasonal fashion garments, the long clearance time was disastrous. In response, the Pacific Maritime Association (PMA), which is made up of shipping lines and port terminals, said that loading and unloading of cargo from ships at night would be stopped; instead, it would move more cargo containers from the docks at night to accommodate the incoming cargo unloaded during the day, and thus clear the backlog. According to industry insiders, many retailers, including JC Penney Co., Macy’s Inc., Kohl’s Corp., Nordstrom Inc., American Eagle, Ralph Lauren and Carter’s were affected by the congestion resulting in clearance delays.

Rising Transportation Costs & Lengthening Supply Chain Delays can result in rising costs and loss of business. Across the Atlantic, European textile importers are now making provisions for unexpected delays and force majeure constraints. This has given a strong impetus to textile importers and service providers to build and expand the textile logistics. Service provider Euro Time Logistik Center GmbH in Bad Bentheim, Germany, for example, has expanded its warehousing capacities for apparel companies, increasing space from some 50,000 to more than 115,000 sq. meters. In the Bad Bentheim-Gildehaus Industrial Park, the Dutch investor Anssems set up some 65,000 sq. meter space for textile logistics companies. The new logistics center has over 25,000 slots in shelves, with additional capacity to hang 2.5 million textile pieces. At the Heimtextil trade show of Frankfurt held in mid-January – this is the world’s largest trade show for home textiles and fabrics – there were many German and non-German companies expressing concern over the rising costs of transportation. In an interview with the American Journal of Transportation, P.K. Markandey, the chief executive officer (international marketing) of Trident Group, Ludhiana (Punjab) in India, said that technological improvement was going to transform the global supply chains in the coming decade. The movement of goods had changed in the past 15 years resulting from the rise of globalized manufacturing supply chains. “With infrastructure struggling to keep pace with the advancements in shipping technology, governments and manufacturing companies are today bearing many of the costs transport companies once shouldered. This shift may likely impact the future of the manufacturing industry, and could have implications for companies and the governments,” he predicted. The US$1 billion Trident Group has diverse interests, including yarns, home-textiles, stationery, chemicals, energy, etc. The United States is Trident’s biggest export market, absorbing some 65% of its exports of home-textiles such as bed-sheets, bath towels, etc. Like Markandey, other textile suppliers were also concerned about the rising and shifting costs of transporting goods. Some of the exhibitors interviewed by this correspondent, however, threw up their hands, describing cost-cutting as an “exercise in futility”. Even as buyers of upper-end quality goods appreciated this trend – buyers in the West were “not disinclined” to pay the resulting increase in the product prices – the suppliers lamented that they were being squeezed of their profit margin. “Since the financial crisis began in 2007/08, shipping companies have struggled to be compensated for the total cost of moving goods from point-to-point because of the huge oversupply of ships relative to demand. This oversupply forced shipping companies to subsidize exporting economies to maintain their market share, but recently shipping companies have started to take drastic measures at cost reduction, with some of these measures resulting in passing on transportation costs to other players in the global supply chain, heralding the end of low transportation costs,” Rudolf Metzler, a German logistics expert who provides consultancy services to an array of industries, explained at the Frankfurt show. “Dramatic Change” in Container Shipping Textile exhibitors at Frankfurt’s Heimtextil show and also at New York’s Texworld spoke of a “dramatic change” in the conventional container shipping, with shipping companies being forced to use larger and more efficient container ships as also larger bulk ships; the shipping lines see this as a way to reduce or, at least, keep the costs in check. Besides, the costs of moving a larger ship across the ocean are only slightly higher, as some exhibitors said. By transporting a larger number of containers, the average cost of transporting each container can be reduced. Nevertheless, congestions have demonstrated that existing port infrastructure was inadequate for larger ships which are being built at a much faster pace than the construction of new infrastructure. Besides inadequate port infrastructure in the importing countries, infrastructure in the exporting countries also needs to be modernized and expanded, as exemplified by India and Brazil whose ports often face massive congestions. With the expanding size of the ships – experts see this as an unavoidable scenario - the biggest container shipping companies are trapped in the vicious circle of building ever larger ships in their drive to achieve efficiency and cost reduction despite the non-availability of infrastructure suited for large-bodied ships. Forming Shipping Alliances While fierce competition can lead to consolidation, shipping companies are forming alliances to save money by allowing competition and spreading out costs and profits among companies through the coordination of loads. Instead of running two half-empty ships, the companies run a single large ship, dramatically cutting costs. Gul Ahmed, a leading Karachi-based Pakistani textile mill producing a wide range of bed linen, blankets and other products, also feels that the global textile trade faces consolidation pressures. “In my view, consolidation is already happening. There are very few strong players left, for example, in the manufacturing of bedding, curtains, etc. As far as I am concerned, there are very few big buyers left and they want to work with large vendors who are flexible and willing to adapt to their (buyers’) needs,” Zaki Bashir, the company’s CEO told AJOT at the Heimtextil show. Although many of the problems facing shipping can be resolved by allocating funds for development of ports, road and rail infrastructure, only a handful of countries actually make adequate allocations for such purpose. Even the United States, which will continue to have one of the world’s most developed infrastructural systems, will need to keep pace with its rapidly growing needs. China, the world’s biggest textile and apparel supplier, has cut its allocations for infrastructure development; other developing countries are finding it extremely difficult to raise money for upgrading their infrastructure to reduce congestion. Olaf Schmidt, the vice president (textiles and textile technologies) of Messe Frankfurt, which organizes Frankfurt’s Heimtextil show, said in an interview with this correspondent that even the so-called global economic engines — China, the European Union and Japan — faced declining economic growth rates and this, in turn, would squeeze their ability to make substantial investments in several segments, including infrastructure. While official investments in infrastructure development may face constraints, private players are quietly making new infrastructure investments for their business. Logistics provider DHL Express, for example, inaugurated in January its new facility in Chandigarh, India to meet customer demand in Northern India. The new facility will provide services such as pick-up, delivery, sorting, etc. with a substantially increased shipment-handling capacity and catering to the logistics needs of customers in northern India. DHL Express India’s senior vice president/managing director, R.S. Subramanian, told journalists that rapid industrialization had enhanced the attractiveness of Chandigarh and its neighboring cities as an industrial hub. Through the service center facility, he said, DHL Express India was strengthening its infrastructure and capabilities to support its customers’ growing business. The facility would also enable DHL Express to move shipments of manufacturers of, mainly, textiles, hosiery, bicycles, auto parts, electronic products, etc. in a faster and more efficient manner.