Shipping blockages, Omicron variant, and port shutdowns are amongst 2021’s activities that took a toll over global supply chains and container transportation. It is crucial to understand the extensive intervention of human labor in the maritime sector, and the Omicron variant definitely affected maritime operations’ comeback. More than200,000 crew members were held in ships last year because of new port closures or quarantines.
We've seen how deterimental high prices have come due to shipping and supply chain blockages, but other problems have risen such as "production bottlenecks, the energy crisis, and the impact of climate change on crops and transport," as illustrated by the Supply and Demand Chain Executive (2022). Moreover, other noticeable impacts include the United States' and China's commercial Cold War, where China has decreased its exports significantly, and has started sourcing technology and supplies domestically.
It has been evident for years now that there key big players in the shipping industry who take monopolistic action when it comes to freight rates. Economies, businesses, and consumers are getting affected, and it might be until the end of 2022 where we'll see some stability in supply chains and shipping rates.
A pandemic could not have been predicted, but lowering your business’ risk could have been controlled. How? Insurance coverage. Especially in the shipping industry, with so many players relying on each other from sourcing, manufacturing, and distribution, ensuring your insurance coverage is enough to cover for future financial losses is essential. There is a specific type of insurance coverage, referred to as “contingent business interruption,” that can protect insurers from other supply chain members' delays. Companies in this sector can look within the financial impacts that their current insurance coverage can handle, and consider adjusting to the world’s unexpected crises.
Maritime shipping insurance can be costly, but some solutions for high costs include air cargo and customers demand for faster shipping. According to Yahoo Finance, the global air cargo market was valued at USD 82,570 million during 2020, and it could reach USD 111,810 by 2027. Now that consumers have experienced shipping delays like never before, demand for faster shipping will not go anywhere. Hand in hand with faster shipping comes cross-border e-commerce growth, less warehouse use, and lower insurance premiums are all contributing to the air cargo market's growth. After the pandemic, we have seen high levels of demand in most industries, and there are no patterns for these levels to shrink. Cargo companies could opt for pushing more towards air cargo freight and assume lower insurance costs, decreasing their delay risks, warehouse storage costs, and reasonably priced packaging.
If freight rates will not decrease in the near future and demand levels are not decreasing, what else besides insuring your goods will be a solution to decrease costs or lower your shipment's risk?
