A month ago Jeff Schrimmer was paying a premium to expedite shipments from China. Now he is willing to pay to slow things down.
The first months of 2020 were a busy period for Windy City Novelties, of which he is president. Inventories of disco ball necklaces and light-up ice cubes were nearly exhausted after his partner factories in Asia were forced to shut.
But in March, as most of America was ordered to “shelter at home”, revenues fell more than 80 per cent and Mr Schrimmer had to cut headcount drastically. The 30-day ocean journey his goods took was once far too slow; now, it is too rushed.
“Anything that can delay the shipment — in China, on the water, or before it hits the Port of Los Angeles — is helping us,” said Mr Schrimmer, who imports between 50 and 100 40-foot sea containers chock-full of party supplies every quarter. “Every day they hold it is another day’s grace period to weather the storm.”
The problem Mr Schrimmer has with his novelty items is being felt across the US and Europe for a broader range of goods such as apparel and furniture.
As recently as late March many western companies were “frantically trying to import goods” after factories in China were temporarily mothballed. Now, the same companies are preparing for a deep recession, said Eytan Buchman of Freightos, a freight forwarding data company.
The act of purposely slowing down shipments is called “slow steaming”. Last April, more than 100 shipping companies in the International Maritime Organization said it was “urgent” to slow steam more goods because it saves money and causes “dramatic reductions” in greenhouse gas emissions.
Usually, companies that rely on seaborne shipping, which accounts for 90 per cent of global trade, stand on the other side of this debate. But now they are asking for containers to become “floating storage” devices, said Mohammed Esa, who runs global business development at Agility, a logistics group.
As soon as shipments arrive, it is up to the importer to pay warehousing and transport fees. “So the slower they get to the European, the US markets, the better, because there’s nowhere for them to go at this point in time,” said Mr Esa.
With the global economy already in or near a recession, shipping companies now cater to this peculiar need.
Maersk and Mediterranean Shipping Company, the world’s two largest ocean carriers, are both offering “suspension of transit” options to give companies the ability to store unwanted shipments at cheaper locations around the globe. MSC offers six locations including Busan in South Korea, Lomé in Togo and another in Panama.
In the event of a V-shaped economic recovery, companies could then restock quickly, but in the meantime they would not have to pay full-price warehouse fees, which have climbed because of labour shortages.
“It will also free up space at origin factories and warehouses and avoid excess inventory at site, bringing cargo closer to destination markets and alleviating the risk of congestion or closure at ports of discharge,” MSC said when it announced the service.
Retailers Walmart and Best Buy, and industrial groups Newell Brands and Mattel, are likely to be “the largest users” of such services, said Panjiva, the supply chain intelligence unit of S&P.
Mr Schrimmer said he typically needs the party supplies he orders as soon as possible, but now, 37 years into his career, he finds himself in an unprecedented situation that “goes against everything in my being”.
“Right now I’m doing an about-face and saying: ‘Please wait. Please hold on,’’’ he said. “You know, ‘give me a few weeks to get my feet underneath me again.’”
It is good news for his partner factories that he wants the items at all. Supply chain executives said a host of companies are simply cancelling orders en masse, often citing force majeure clauses that label the coronavirus pandemic an unforeseeable circumstance preventing them from fulfilling a contract.
According to Panjiva, US seaborne imports from China fell 59.5 per cent in the first three weeks of March from a year ago.
“I’ve heard every permutation of orders being cancelled, I’ve heard people having containers literally on the dock in China and then saying they don’t want it,” said Jim Newsome, chief executive officer of South Carolina Ports Authority.
“What nobody anticipated is how quickly the western economies have gone down,” Mr Newsome added. “We thought we’d have a snapback — and we did for four weeks — but now lots have been cancelled.”
Like many others shell-shocked by the impact of Covid-19, Mr Schrimmer said he never imagined the business could come to a halt like this.
Windy City Novelties is diverse — it sells goods directly to consumers for weddings, birthdays and proms. It sells to retailers, too, and theme parks and carnivals. Last year it acquired a small competitor to do more wholesale distribution. What it was not prepared for was a world in which few social events are taking place at all.
“Everything we do circles around celebration,” Mr Schrimmer said. “This is out of control.”
Additional reporting by Andrew Edgecliffe-Johnson
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Companies try to slow product shipments from overseas - Financial Times
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