FURTHER investments in warehousing facilities are expected this year to address the supply chain constraints fueled mostly by port congestion amid the pandemic, according to Oxford Economics.
The UK-based think tank, in a research briefing, noted that the shift to online purchases given the movement restrictions in the pandemic has resulted in maximizing the capacities of warehouses in several countries.
As a result, Oxford Economics said there have been warehouse shortages, signaling the need for expansion amid the growing e-commerce industry.
“We anticipate increased warehouse investment will help reduce port congestion and boost supply chain resilience,” it said.
“Warehouse automation, robotics, and the use of smart technologies, such as blockchain, are also expected to help drive growth and productivity in the sector over the long term,” it added.
Such is deemed necessary as transportation bottlenecks are likely to remain this year, the report said, noting that port and shipping capacity, along with shortage in warehouse space, labor and truck trailers, are contributing to supply-chain challenges.
“Demand-side pressures for warehousing facilities are likely to persist in the near-term, but as consumer spending continues to rotate away from goods to services, these pressures will ease,” Oxford Economics said.
However, the think tank warned that the Covid-19 Omicron variant may delay the said shift in consumer spending.
Costlier freight
The report, meanwhile, noted that freight rates have become more expensive given the shipping bottlenecks that have been affecting operations.
“Container shipping rates are currently around nine times their level relative to June 2020, the lowest value since the start of the pandemic, highlighting coordination problems,” Oxford Economics said. “Even as ports increase operating hours to ease congestion, absenteeism related to renewed increases in Covid-19 infections may scupper hopes of these pressures abating in the near term.”
Recently, Dr. Enrico Basilio, chief of party of the University of the Philippines Public Administration Research and Extension Services Foundation Inc.-Regulatory Reform Support Program for National Development, flagged anew the continuing increase in cargo-handling rates.
He said that the Philippine Ports Authority (PPA) has been imposing a “systematic increase in rates” almost every year.
“And during this pandemic, especially in 2020 and 2021 when trade, both domestic and foreign trade, dropped, rates have been increased, and new rates have actually been introduced,” he said.
With this, the Export Development Council earlier proposed to eliminate the share of PPA in cargo-handling revenues to bring down logistics costs amid the shipment constraints.