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In China, One Of The World’s Busiest Ports Has Temporarily Shut Down—How Will It Affect Q4?

The world’s third busiest carrier port suspended operations earlier this month after it was confirmed an employee tested positive for Covid-19, disrupting global supply chains still struggling to confront the ongoing strain caused by the pandemic.

Eastern China’s Ningbo-Zhoushan Port closed its main Meishan Island terminal on August 12th after a 34 year old employee was reported with an asymptomatic infection of the novel coronavirus. The port reportedly processed 623 million tons of cargo during the first half of 2021, setting a record for the year. State television also confirmed Ningbo Lishe International Airport has suspended inbound and outbound flights to the capital Beijing on August 11th due to an unidentified "public health incident." It is unclear whether the two incidents are related.

While shipments are reportedly being diverted to other terminals nearby, data traffic indicated that 28 container vessels were already in queue at the port when news of the shutdown broke. The suspension has already sparked fears of a congestion similar to that experienced by the Yantian International Container Terminal earlier in the year, when a COVID-19 outbreak resulted in a 99 percent increase in waiting times.

International Trade and the Breakdown of Global Supply Chains

Approximately 46 percent of the cargo handled by Ningbo-Zhoushan port is overseas trade originating in Shanghai, with North American and European markets being the primary customers. But while the crisis facing global supply chains existed long before the port’s shutdown, It took a global health crisis to expose the fragility of the relationship between logistics, manufacturing and fulfillment.

It’s been estimated that a potential $4 Trillion in losses were the direct result of supply chain disruption in 2020, with 64 percent of North American and European companies reporting a loss of up to 20 percent of their business. While China’s policy towards COVID-19 monitoring remains notoriously stringent, the vulnerability of supply chains isn’t isolated to pandemic measures. Nor is it exclusive to China. The recent flooding which affected both Western Europe and China and left over 200 dead effectively paralyzed supply chain fulfillment for both nations, while cyber attacks at four separate South African ports in July affected over 60 percent of the continent’s imports and exports.

But the collateral loss of the supply chain crisis has ultimately spurred an inflation in the cost of both manufacturing and delivery which has been exploited by many suppliers. A 229 percent increase in shipping costs from China to the US was reported in July, with costs as high as $32,000 resulting from private firms stockpiling containers to be leased to the highest bidder. And with Black Friday looming just around the corner, the sparse regulatory oversight in China’s shipping and transportation market could ultimately affect Q4’s retail sales.

How Will Q4 Be Affected By Supply Chain Disruption?

The shutdown of the Ningbo-Zhoushan port couldn’t have come at a worse time. With domestic retail sales predicted to increase to over $4.44 Trillion by the end of 2021 (with roughly a quarter of those sales coming from online purchases), the disruption comes as a sobering reminder that we’re not entirely immune from the after effects of the pandemic just yet—particularly as reports of the number of Delta variant cases continue to rise.

Inventory levels will continue to be a critical dilemma for both retailers and vendors in the weeks leading up to Q4. Retailers have already begun to extend Black Friday deals and promotions, but smaller digital companies may not necessarily have that luxury. And the increase in the cost of raw materials has ultimately been passed on to both merchants and customers. Until realistic alternatives to marine transport become affordable and practical, the uncertainty of global supply chains will be aggravated by increased customer demand during Q4. Digital merchants can ensure that their own processes remain relatively safe through frequent communication with both suppliers and customers, with contingency methods developed to ensure both inventory levels and delivery. The result may be an increase in your pricing. But it can mean the survival of your business during an already challenging period.

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