International freight alert

As the end of the year is approaching, we would like to keep you informed about the current international freight situation. Still, the sexual and reproductive health supply chain is facing challenges under the current volatility and tension in the transportation market caused by the COVID-19 pandemic. Subsequently, global operations are impacted by the international transport instability and its delivery times. 

This communication gives a brief description of the actual situation and the measures UNFPA is taking to deliver under the pressing environment.

Overall, the situation has not changed significantly since the beginning of 2021. For ocean freight, securing bookings and containers remains extremely difficult, especially at the agreed contract rates. Over the past year, together with other shippers, UNFPA had to rely on spot rates to secure space on cellular vessels. Although these rates were record high, vessel operators would also request that shippers pay a ‘priority fee’ to guarantee their booking on a particular vessel to meet the sailing dates. We are pleased to say that to date, UNFPA has not paid this priority fee. UNFPA is continuously monitoring the market and maintains a pool of freight forwarders to ensure that the organization receives the best value for money when it procures freight services. Increased collaboration with suppliers and freight forwarders has been a key driver in managing logistics related costs and keeping them low. Our suppliers and freight forwarders have oftentimes been requested to keep the products in their own warehouses, while possible solutions and availability of international transport are explored.

Other upstream challenges include disruptions in port operations caused by natural disasters, such as the recent typhoons and cyclones that affected some of China’s busiest ports. Other man-made disturbances such as those that affected Durban port and delays on the American West coast also contributed immensely to interruptions in logistics chains. The butterfly effect is a major cause-and-effect phenomenon in global maritime transportation. Disparate complications occurring in different locations converge to disrupt vessel schedules, empty container repositioning, and crew changes.

The air freight industry has not been spared. There has been incremental improvement in the overall capacity as the year progressed; however the industry is still affected and is still below 2019 levels. Air freight rates are expected to remain high due to demand in an environment crippled by capacity imbalance exacerbated by peak season demand. For UNFPA, air freight plays a crucial role in delivering low volume as well as time and temperature-sensitive medications in the best conditions by means of state-of-the-art procedures and technologies. The cost-competitiveness of air cargo relative to that of container shipping has improved over recent months, with the average cost of air cargo six times more expensive than sea freight, compared with 12 times more expensive pre-crisis. UNFPA has been choosing to move some ocean shipments to air despite the expense, to guarantee delivery of supplies particularly when county offices are faced with stock-outs.

UNFPA continues to ship commodities and supplies to some of the most complex destinations in the world. These include island countries with limited connectivity as well as countries dealing with internal strife. In most areas, trade facilitation practices are evolving. Epidemiological concerns arising from the Covid 19 pandemic have also led to restrictions in the movement of cargo. These downstream challenges have been a perennial challenge when shipping cargo. This leads to delays in obtaining greenlight, impacts on supply chain visibility, and information flows. In 2021, the UNFPA established a dedicated Logistics and Shipping Unit (LSU) to mitigate these challenges. The establishment of the LSU has increased UNFPA’s control of its shipments. This has allowed for greater risk management and minimization of additional charges such as storage, demurrage, and detention. The LSU has also assisted in-country teams with capacity strengthening to ensure minimum disruptions while cargo is in transit. UNFPA is working with its freight forwarders to improve the visibility of cargo in transit. UNFPA has also launched an initiative to track Time-Temperature Sensitive Medical Products, aligned with the Good Distribution Practices for pharmaceutical products to ensure women and girls receive quality products. 

For more information or questions, please contact us at procurement@unfpa.org.