By Nick Lung    Photo：CANVA

As the impacts of climate change intensify around the world, the impact of climate-related logistics disruptions could become a daily occurrence for importers and exporters.

Climate change has always been an "unstable external factor." At the end of 2023, the drought in the Panama Canal caused the transit volume to be reduced by one-third of the normal level. It can be seen that the impact on the supply chain is definitely far more than one-third. Tracking shipping and freight costs has become a top priority. Given that 90% of the world’s international trade is transported by sea, this also increases the risk of climate-related damage such as tropical storms, floods, droughts and rising sea levels.

Experts solemnly point out that the turbulence of climate change we have seen so far is "just the beginning of the whole thing." It is estimated that by 2050, rising sea levels and inland flooding caused by global warming may cost the logistics industry billions of dollars each year, as the gap between the upper surface of the waterway and the bridge above it shrinks, which may lead to attacks on cargo ships. New height restrictions appear. The condition of the Panama Canal has also forced the world's leading shipping companies to use expensive "land bridges" to transport cargo to avoid the risk of maritime failure. This land bridge connects Panamanian ports and is connected by nearly 50 miles of rail.

Supply Chain also estimates the global economy will experience sluggish growth of 2.5% in 2024, which would be the slowest growth rate in five years in 30 years. The main reason can be attributed to the fact that demand has not yet fully recovered, and various unstable forces continue to play a role in the global supply chain. A new adaptation period is needed before people's consumption patterns change. In addition, due to weak global demand, excess shipping capacity of shipping companies, and labor shortages, and geopolitical uncertainty, particularly as the Red Sea crisis persists with no end in sight, freight forwarders have experienced particularly difficult times. The shipping industry has also experienced similar difficulties, with mediocre import and export demand and a large number of new ship orders during the epidemic, resulting in excess shipping capacity. Various circumstances have led to a very pessimistic supply and demand cycle for the entire logistics industry.

As Houthi attacks continue near the Suez Canal, shipping companies estimate that rerouted cargo will have to add about 10 days to their journeys around South Africa's Cape of Good Hope. In some cases, it has delayed ships by two to three weeks and cost shipping costs as much as $10,000 per 40-foot container. Shipping companies add surcharges from time to time to account for the increased risks and insurance costs associated with traveling through conflict zones. However, setting up overseas warehouses may be a good choice to improve the supply chain situation.

Overseas warehouses have several significant advantages in international trade:

Fast delivery and reduced logistics costs: Overseas warehouses are usually located near the target market, which can significantly shorten delivery time. This means faster delivery for consumers and higher customer satisfaction and repeat purchase rates for sellers. In addition, overseas warehouses can help reduce logistics costs by avoiding additional fees and tariffs in cross-border transportation.

Improve market competitiveness: Setting up overseas warehouses abroad can compete with local competitors more effectively. Through localized inventory management and logistics networks, companies can respond more flexibly to changes in market demand and better understand and meet the needs of local consumers.

Avoid overseas logistics risks: Since overseas warehouses can store goods in the target market first, they can reduce risks caused by unforeseen factors in international logistics (such as weather, policy changes, etc.). This flexibility and stability are critical to maintaining supply chain stability and reliability.

Support local market sales strategies: By setting up overseas warehouses in target markets, companies can better formulate and implement localized marketing and sales strategies. For example, it can be easier to launch promotions or product packaging specific to that market to increase brand awareness and appeal in the local market.

Better customer service and experience: Overseas warehouses enable companies to provide faster and more reliable customer service and after-sales support. Reducing delivery times and possible issues or delays helps strengthen consumer trust and loyalty to the brand.

It can be seen from the above that overseas warehouses provide important support for companies to succeed in the international market by providing faster and more reliable logistics solutions, reducing costs and enhancing market competitiveness.

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