Martin Karczewski, VP of 3PL Services at UWL, reflects on capacity management and other supply chain lessons learned while navigating unprecedented challenges like the Financial Crisis and COVID in logistics.
Revisiting the Past: Parallels Between the Financial Crisis and COVID-19 in Logistics
While there are continued lingering effects, for the most part, the global logistics industry has returned to pre-pandemic conditions. As we reflect and look to understand what we can learn from these ‘unprecedented times’, I read a white paper I wrote back in 2011 during the aftermath of the Financial Crisis. What jumped off the page to me was that, from a logistics perspective, the COVID period wasn’t 'unprecedented' at all — in fact, the challenges and experiences were eerily similar:
"In 2009 and more so 2010, those who participated in the global transportation business witnessed fiscal, operational, and often emotional turmoil. Rate wars, capacity reductions, financial bailouts, service cuts, organizational restructuring, and a global recession later, international carriers have not only returned to fiscal stability, they have learned a lesson that is far more valuable: Their business is a commodity, that commodity is capacity, and effectively managing capacity drives their business success."
When comparing the Financial Crisis with COVID-19, it's clear that challenges like rate conflicts, capacity cuts, and restructuring were common experiences, and ocean carriers have recognized the importance of adeptly managing capacity as a critical factor for achieving success.
Capacity Crunch: Challenges in Global Logistics During Crisis
Both during and after COVID, we’ve witnessed challenges associated with capacity management on both ends of the spectrum. At the height of the pandemic, we saw wave after wave of Alliance and niche carriers hammering US ports with record volumes, leading to months of vessel and container delays, an inability to pick-up or return equipment, hundreds of millions of dollars in penalties (leading to OSRA) and essentially a buckling of the logistics infrastructure.
More recently, we’ve experienced a whiplash effect with all but one niche carrier (our very own Sun Chief Express service) exited from the transpacific trade and Alliance carriers aggressively repositioning or removing capacity. Global trade and supply chain is complex with, frustratingly, supply and demand models that are often conflicted.
"Lack of visibility, flexibility, options, control at origin, and even compliance all combined in a perfect storm to inflict pain on many importers: lost sales, penalties, chargebacks, damaged relationships, lack of trust, and costly inventory imbalances. How many times were you "out of stock"?"
The above excerpt from my 2011 article is verbatim the experience of shippers between 2020 and 2022, and in many cases, companies are still suffering the effects. It was easy to know you had a supply chain issue, but being able to specifically identify where the issue existed, who was responsible and what resources were available to help you solve the problem was significantly more challenging. Both Alliance and niche carriers all but gave up offering solutions, instead opting for a “I got it here; the rest is your problem,” mentality which only added to the frustration (and cost) for shippers.
The Role of NVOCCs in Shaping Resilient Supply Chains
Whether it be a live person to talk to, a tech stack that delivered critical visibility, or access to a multi-carrier portfolio; in ‘08-‘10 just like ‘20-‘22, the NVO business model became an incredibly valuable safety net, and in many cases, the difference between success vs. failure for shippers of all sizes and complexities.
So, as we prepare for this coming contract season, we are challenging you to think differently. To rethink the role of the NVOCC — not just as a strategic partner, but as a facilitator of choices, flexibility, and visibility inside your supply chain.
Your experiences in ’08 vs. ’20 may have felt very different, but it is my opinion that the roots are the same. We’re in a risk management industry and selecting partners to help you mitigate that risk is one of the most important decisions we make. You might be exiting a multi-year arrangement or you rode your luck on the spot market, either way — embracing the flexibility of the NVO model has proven, over some incredibly turbulent times, to be a powerful tool every shipper should incorporate.
About the Author
Martin Karczewski, VP of 3PL Services, UWL
At UWL, Martin Karczewski plays the vital role of “Solution Architect”, strategically using UWL’s suite of services, technology, and value-added tools to craft integrated supply chain solutions for their clients. Karczewski also handles UWL’s contracting and carrier management, process improvement, and compliance.
Originally from Birmingham, UK, Karczewski started his logistics career with Expeditors in '93. He moved to the US in 2001, later joining Laufer Group International in 2006 where he ran international operations from their New York City headquarters. In 2019, Karczewski relocated to Cleveland, OH and joined UWL to run operations before transitioning to commercial and procurement roles in '22. His areas of expertise include international logistics, transportation management, and freight forwarding.
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