It is disheartening to read that “out of stock” message, especially when you are a coffee lover. The delayed delivery could be due to a global shortage of the large metal containers used to transport goods by ship.
As we know, most of the goods, like coffee beans, are transported globally in containers on cargo ships. More than 90 per cent of the commodities are transported by cargo. Container shortage is a challenge faced in the supply chain management system of coffee beans. This has caused various difficulties like pricing, availability, and sustainability of the coffee bean market. The coffee bean buyers, who source beans from Ethiopia and Brazil, face difficulty due to container shortages.
Major Causes of Container Shortage
Container shortage is a major problem in the logistics of the coffee bean. It was worse during the pandemic due to a temporary lockdown. Other major causes include the unavailability of labourers and geopolitical events.
1. Pandemic
During the COVID-19 pandemic, the entire logistics were disrupted due to the lockdown. Empty containers remained in different cargo ports and inland depots. Post-pandemic, the entire logistics system has not recovered yet due to the unavailability of containers and a reduced number of cargo ships.
2. Geopolitical Events
Houthi attacks in the Red Sea have adversely affected the cargo ships. They have attacked and hijacked cargo ships going through that route. Many companies have rerouted the way through the Cape of Good Hope, which increased the time and fuel costs. This has impacted Ethiopian coffee exporters and coffee buyers alike.
3. Labour issues
The shortage of a sufficient workforce and other support mechanisms in the port caused a delay in transportation and added to the total cost. Labour issues or a shortage of truck drivers will affect the supply management system adversely.
4. Increased demand for coffee beans
There is an increase in demand for coffee from the existing markets and emerging markets like China. This has put more pressure on the already existing logistics system. The container shortages will increase with the coffee demand and require strategic solutions.
Impact of container shortages
The supply chain management of the coffee exports will be disrupted due to the shortage of resources like containers in the transport system. In this section, let us see how the container shortage impacts the entire system.
1. Coffee quality
Lack of availability of containers will cause delays in shipping. The quality of coffee beans decreases over time. The coffee bean gets oxidised if it is exposed to air. It degrades the aroma and flavour of the coffee. For specialty coffee exports, timely delivery and proper storage are important to retain the freshness of the coffee bean. The distinctive flavour of the coffee degrades if it is not transported efficiently.
2. Small coffee buyers
Small-scale coffee buyers and speciality retailers are often affected by the reduced containers and the increase in the cost. They don’t have the power and financial resources like large corporations to purchase coffee beans. These buyers operate within the budget limits and small orders. Shipping companies usually don’t prioritise small-scale coffee buyers. This results in inconsistent supply, delays in delivery, and rising costs. All these factors affect their operation and customer satisfaction.
3. Coffee bean producers
For coffee bean producers like smallholder farmers, the global container shortage poses a serious issue. As only a few containers are available, it causes shipping delays, and coffee producers have to store beans for a longer duration, which leads to quality concerns. Producers also face a financial crisis as they won’t get payment on time. In some cases, coffee bean producers are forced to sell the beans to local markets, which reduces their income.
4. Shipping delays
Shipping delays are another effect of the container shortage. It has disrupted the global supply chain of coffee exports. The coffee exporters had to wait longer to secure a place on the cargo ships due to container shortages. This results in extended transit times that affect the timely delivery of the exports.
5. Increase in freight cost.
The shortage in the availability of containers has increased the freight cost. Limited containers have resulted in the demand for space in cargo ships. The cost of transportation in a standard container has doubled compared to pre-pandemic rates. The increase in cost impacts coffee buyers, producers, and customers.
Effective strategies to solve container shortages
Implementing proper strategies is necessary to reduce the effect of the container shortage on the logistics of coffee exports.
1. Communication
Clear communication is necessary to address container shortages in exports. Real-time updates among the suppliers and shipping liners are necessary for the timely delivery of commodities. Tracking the cargo ships and inventory also helps to solve the problem of container shortages. Transparency is important while sharing information between various departments to manage issues like delays and container shortages. Coordinate with suppliers to schedule orders at the right time.
2. Increase inventory
Keeping a large buffer stock is important to reduce the risk of unpredictable delays. However, it requires more capital and storage facilities. If possible, increasing stocks can help to meet the rise in demand for coffee beans.
3 . Diverse sourcing and logistic partners
Do not rely on a single supplier or shipping route, as it can disrupt the business. So, always source products like coffee beans from different regions. Also, alternative shipping routes and ports reduce the risk of container shortage. Also, exploring other options like rail or road transport increases flexibility. Evaluating the performance of the shipping route and the supplier also helps in risk management.
Conclusion
Container shortage issues started during the pandemic, and it has affected global trade and economic stability. Most of the commodities are transported in containers by ships. After the pandemic, the shipment cost has also increased due to various reasons. Geopolitical tensions have also affected the cargo movement through the sea route. Effective logistics and supply chain management enhance the timely delivery of coffee beans.