The transport industry continues to face significant changes related to most logistics-related business activities. Transportation entails moving people, goods, and services from one point to another. It involves detailed organization and implementation of complex operations that ensure successful delivery. The transportation of bulky goods has been dependent on shipping and has become constrained due to COVID-19 and the ongoing Russia-Ukraine war. COVID-19 had adverse impacts on the shipping industry as the demand for specific goods shrank, and an increase in demand was experienced for goods that could not wait for extended shipping durations (Gavalas et al., 2022). Ships were also required to stay in territorial waters for longer periods as they were prevented from accessing destination ports, leading to higher costs for respective companies. The Russia-Ukrainian war has introduced more challenges due to the disruptions in shipping that have caused a significant increase in the demand for their services (Jagtap et al., 2022). Interruptions in the shipping industry due to the two recent events indicate the need for more efficient logistics systems to anticipate events and implement relevant measures to reduce the impacts of global events.
Efficient shipping activities depend on several aligned factors, including container availability and sufficient warehouse space, which are ensured through logistics systems that manage the bulk of shipping activities. Proper management of shipping activities ensures that containers are handled correctly and that there are sufficient containers to support the transportation of other goods (Song, 2021). Several forms of logistics are used to ensure the effective management of containers between points of origin and destinations, which ensures that shipping processes are not interrupted (Song, 2021). However, recent events have led to significant disruptions where ports experience an influx of containers due to congestion and the lack of warehouse space. These factors adversely affect the shipping industry, whereby various stakeholders incur costs related to a lack of containers and warehouse space.
Disruptions in the shipping industry have led to higher freight charges prices due to high logistics costs. Freight charges have increased since the start of the war due to the inconveniences that emerged. Some of the impacts include shutting off shipping routes and causing reroutes for ships that used to use those routes. It increases the costs due to longer routes and changes in logistics (Tan, 2022). The war has made parts of the Sea of Azov and the Black Sea unsafe and impassable for vessels that used to rely on them (Tan, 2022). The logistics involved in changing routes have increased freight charges that have become evident in several items (United Nations, 2022). The adverse impacts are estimated to continue as several factors remain unpredictable with the war. Shipping companies are forced to consider adopting new shipping routes with a lower vulnerability to conflict. The logistical impacts will be significant if companies do not find new ways of achieving efficiencies.
The closure of ports is one of the recent impacts of the war and was witnessed during COVID-19 due to government restrictions, leading to several logistical impacts on respective stakeholders. Ports are vital infrastructures in shipping since they represent the point of departure and arrival of goods. Ports play a critical role in transportation due to their strategic locations. The closure of ports due to uncertainties that arise from COVID-19 and influxes in ships and containers has significant impacts on the shipping industry. Several factors arise from the closure of ports. The first outcome is the losses incurred by shipping companies and other stakeholders who wait for their goods to be transported or delivered. It leads to higher freight charges since shipping companies charge higher fees to cover their losses. These costs are also transferred to consumers through higher costs of goods, leading to inflation and other adverse outcomes. Logistically, it has become more expensive for goods to be transported since individuals have to find alternative ways to transport them.
Shipping delays and congestion in ports have become characteristic of current shipping, leading to unforeseen impacts on the industry. Shipping is highly dependent on the effectiveness and efficiency of existing logistical systems. The digitization of the systems has always been presented as a way of enhancing the efficiencies in logistics. However, current events indicate that efficiencies in logistics are yet to be achieved as more challenges continue to emerge in shipping. Congested ports and shipment delays are part of increased freight charges. It is also making clients in the industry pull back orders and consider new transportation methods as the adversities increasingly outweigh the benefits of using shipping for freight.
Efficiencies in logistics are crucial in shipping since it is considered the true global supply chain. More than 70% of global trade is done through shipping by value (Song, 2021). Approximately 50% of the world’s goods were moved through ship containers in 2018 (Song, 2021). These statistics show the significance of shipping in global trade. The disruptions in shipping increase the focus on existing logistical systems meant to address the current challenges. Logistics ensures that all goods move efficiently from the points of departure to their destinations. Issues in logistics became evident during the pandemic when demand increased significantly, and shipping became one of the primary services. The continued existence of these challenges calls for interventions that will help improve logistics and facilitate continued trade, despite such disruptions.
The challenges existing in logistics should not be entirely blamed on the lack of innovation and efficiency in shipping since logistical improvements are consistent and continue to support global trade. Transport and logistics services facilitate global trade and are responsible for economic growth (Gani, 2017). Logistics services in shipping have been improving over the years to facilitate the demand for greater efficiency and cost reductions. The systems have served global economies effectively until the recent events that are difficult to detect and plan mitigation measures. Stakeholders in logistics are consistently innovating to ensure the provision of the best services. Therefore, two unpredictable events cannot be the only metric that measures the issues experienced in the shipping industry today.
The shipping industry is dependent on logistical services to be efficient. Several logistical services are used to ensure that goods move from one location to the next in the transportation sector and the shipping industry is one of the areas where efficiency is more significant than several other factors. The Russia-Ukraine War has presented a unique challenge to shipping logistics after a short period of normal resumption of operations after the pandemic. COVID-19 saw a significant increase in the demand for shipped goods that was not expected by shipping companies and other stakeholders. The current war presents new challenges that have disrupted global economies. It has led to delays in the delivery of goods, increased freight charges, and subsequent increases in prices of goods. Enhancing logistical efficiencies is required in current systems to ensure that some systems are able to determine the immediate impacts of foreseen events and mitigation measures implemented to avoid similar outcomes.
References
Gani, A. (2017). The logistics performance effect in international trade. The Asian Journal of Shipping and Logistics, 33(4), 279–288. Web.
Gavalas, D., Syriopoulos, T., & Tsatsaronis, M. (2022). COVID-19 impact on the shipping industry: An event study approach. Transport Policy, 116, 157–164. Web.
Jagtap, S., Trollman, H., Trollman, F., Garcia-Garcia, G., Parra-López, C., Duong, L., Martindale, W., Munekata, P., Lorenzo, J. M., Hdaifeh, A., Hassoun, A., Salonitis, K., & Afy-Shararah, M. (2022). The Russia-Ukraine Conflict: Its implications for the global food supply chains. Foods (Basel, Switzerland), 11(14), 2098. Web.
Song, D. (2021). A literature review, Container Shipping Supply Chain: Planning problems and research opportunities. Logistics, 5(2), 41. Web.
Tan, W. (2022). How the Russia-Ukraine war is worsening shipping snarls and pushing up freight rates. CNBC. Web.
United Nations. (2022). Global Impact of war in Ukraine on food, energy and finance systems: A three dimensional crisis. United Nations.