By now, the global shipping crisis has entered our awareness, and up and down the coffee supply chain, we’ve all experienced its effects first hand. Yes, Covid-19 started the dominos tumbling—layoffs resulting in shutdowns while simultaneously triggering a drop in demand for goods and services. Then, when Covid didn’t go away and the lull in importing led to inevitable shortages, the world experienced an upsurge in demand far surpassing the previous level, and suddenly we had a shortage of everything from the products needed to manufacture goods to shipping containers and space on container ships. And of course, the world of specialty coffee is caught right in the middle of it all. The current shipping crisis is impacting the coffee supply chain in three main ways: increased transit times, increased shipping prices, and an increased level of uncertainty.
As supply chain challenges persist,
don't miss out on crucial holiday sales.
Ask us about our 2022 Holiday Season Promo!
Increased Transit Times for Green Coffee
Attributing the current shipping crisis solely to Covid-19 complications stops short of fully exposing underlying issues that helped create what some experts are calling “...the worst shipping crisis since the 1930s.” In reality, international shipping is an “old guard” industry—entrenched, traditional, and to a great extent monopolized by the big companies who have an enormous amount of room for innovation but no felt need to change the status quo. (The costs to compete with these front runners effectively stiff-arms smaller, scrappier players, but that is a topic for another day).
While over the past decades the shipping industry has been doing business as usual, another force has been eating away at its foundations: that of JIT (Just-in-Time) inventory management. In an October 2021 interview at the Fortune Global 500 Summit, managing director of Maersk China, Jens Eskelund, said, ““What we’re seeing right now is, to a certain extent, a consequence of a single-minded focus we’ve had in the industry up to now of focusing on efficiency and just-in-time delivery.”
Just in Time Shipping Model
Pioneered by Japanese firms 60 years ago, the just-in-time supply chain operates on the principle of ordering only what is absolutely necessary in the short term, keeping upstream suppliers on short notice to produce inventory on an as-needed basis. There is a beauty in this style of management. JIT allows coffee roasters to operate in facilities with little to no extra storage space and frees up cash flow by bringing in new coffee just before they run out of their previous supply. As an example, many California and Nevada roasters may store only a week or two worth of coffee on site, shipping regularly from CTI Annex warehouse in Alameda, CA to their roasting facilities. This model may have been workable before Covid shutdowns, but the present reality is that it is taking longer to import coffee and transport to roasteries. A lot longer. JIT is turning into NIT—Not-in-Time.
Before the current shipping crisis, importers like Catalyst Trade could figure on a three to five week transit to bring Ethiopian coffee from the Port of Djibouti to Port of Newark, NJ. Six weeks maximum. Now? That same transport is taking anywhere from six to sixteen weeks due to the container shortage coupled with congestion en route and at transshipment points as well as at US arrival ports! Case in point: in 2021, Catalyst Trade had four containers leave Djibouti mid-March. Instead of the expected mid-May landing, those containers did not reach New Jersey until July 27th, more than two months beyond that anticipated arrival date. So heads up! Projected transit times for importing 2022 fresh crop Ethiopian coffees will be an average of six or more weeks, with no guarantees those time frames won’t stretch to double that number.
Hurry Up and Wait Some More
And unfortunately, once our containers loaded with fresh crop Ethiopian coffees reach the US, the wait is not over. As we’ve been hearing on the news, Newark to Savannah, Long Beach to Oakland, US ports are experiencing increasing delays, with ships sitting at anchor miles out in the ocean for weeks just waiting for their turn at the unloading cranes. And of course, while they’re waiting, they’re still paying wages to crews, which in turn drives up the cost of shipping as they pass on those expenses to importers.
Though the White House stepped in to shift Southern California ports to a 24/7 schedule to address the problem, it is like swatting mosquitoes while you’re being eaten by a lion. Business Insider quotes Brian Whitlock, a supply chain analyst at Gartner: “It's great that they've chosen to do something, but we're talking about a less than 1% to 2% change here." He also said that we can expect even more disruption next year  at US West Coast ports as contract negotiations between unionized dockworkers and terminal operators take place, which has historically led to delays and backups.
Backlogs and Wait Times at Ports
Meanwhile, not only do we have a continuing shortage of dockworkers and truckers to pick up containers from the port yard for transport to warehouses and beyond, according to 20-year veteran truck driver, Ryan Johnson, in his article on the shipping crisis from a trucker’s perspective, it turns out there is an average of one crane per 50 -100 trucks waiting to pick up containers at many ports. He says, “Think of going to the port as going to WalMart on Black Friday, but imagine only ONE cashier for thousands of customers. Think about the lines.” He goes on to state that hundreds of trucks form a line daily to pass into the container yard through 5–10 available gates. A second line holds trucks waiting to pick up their container. A third line is for those waiting to get out. He adds, “For each of these lines, the wait time is a minimum of an hour, and I’ve waited up to 8 hours in the first line just to get into the port.”
And to make things worse for truckers? All that waiting time is uncompensated. It’s no wonder the shortage of truck drivers has grown to 80,000 or more. So once that container of coffee finally makes it to the warehouse, this same trucker shortage is causing all sorts of issues with LTL (Less than Truckload) carrier pickups. Pre-Covid, we at Catalyst Trade could put in a release order (DO), and the load was picked up on the designated day, with missed pickups being the exception. They have now become the norm. Not just one miss or two. We’re seeing LTL carriers miss picking up pallets up to a week at a time due to being out of capacity and other complications.
Intermodal transport involving moving fully loaded semi-truck trailers on railroad cars has also seen unprecedented demand. The result is congestion at rail line transfer hubs that rival those at ocean ports. In some places, containers are waiting two or more weeks just to make it onto a rail car.
Of course, all these shipping-related challenges are resulting in increased prices across the board for importers and roasters alike. On the import side, coffee is competing with every other commodity for containers, space on the ships, and berths at the ports. These factors coupled with increased transit times on the water and port delays have resulted in a quadrupled price for shipping a container of coffee from Ethiopia to the US. And that price keeps rising. As of early 2021, Maersk, one of the largest shipping companies on the planet, has discontinued contracts that would lock them into a set price for a certain amount of time, and have gone instead to spot bookings only, offering whatever the current rate might be at the moment. There is no ceiling on that rate in sight, at this point.
Roasters are also dealing with the increased costs of LTL shipping. Not only are transit timelines sometimes close to double pre-Covid-19 rates, we’re seeing increased damage on loads as trucking companies scramble to meet demand with less personnel and fewer trucks in play. Whether due to carrier staff being stretched beyond capacity, new hires perhaps not understanding the ropes or being as skilled at the job, and who knows what other factors, we’re seeing more upcharges: random reweighings that result in new invoices, zoning charges, and more.
It is absolutely no surprise that increased shipping timelines and escalating prices to import and transport green coffee have injected a whole new level of uncertainty into the coffee supply chain. What was working before is not working now, and we’re all striving to adjust expectations and practices to roll with the punches. One factor that mitigates against adapting in this current shipping situation is what could be termed the “Amazon effect”: we’re all so used to clicking a button, and voila! Our purchase shows up on our doorstep, sometimes as soon as the next day. Though Amazon itself is being challenged by the shipping crisis, the important take-away here is that the coffee supply chain is not (nor has ever been) Amazon.com. There is no such thing as overnight delivery in this industry, and now more than ever, long-term planning and execution is the name of the game.
It appears that somewhere between Just-in-time and Just-in-case inventory management is the elusive sweet spot we’re all striving to find these days. Revising the Amazon.com viewpoint is a step in the right direction. Savvy forecasting that takes into account the fact that coffees may be delayed at origin, during the shipping process, and/or from warehouse to roasterie is another.
While the current shipping crisis and all the accompanying pieces that make it a global issue are anything but welcome, innovation seems to be a byproduct of tough times. Without being overly positive, the challenge for the coffee supply chain (as in all arenas), is to view closed doors as invitations to new opportunities. As an example, many coffee shops entered 2020 with virtually no online shopping presence, but when the pandemic hit, they turned their innovation switch to high, pioneered their own versions, and pulled out of the initial Covid-19-induced slump with a whole new and productive way of approaching sales.
Yes, the shipping industry as a whole needs a solid overhaul from top to bottom. Definitely. But while we’re waiting for the big pieces to shift (something some experts don’t expect will happen any time soon), it’s a good time to look for new ways to proceed in the here and now. What about our usual way of doing business is causing friction? What new opportunities and more adaptable, agile practices are waiting to be discovered?
To assist you in this wild and ever-shifting shipping environment, we at Catalyst Trade have created our Logistics Toolkit, jam-packed with info, know-how and FAQs to help make sense of the logistics portion of the coffee supply chain. Meanwhile, let’s all hang together and continue to do our shining best to help the world of specialty coffee find a way to move forward with excellence, sustainability and hope!
Written by Leslie Wyatt