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Supply chains have been in the news a lot this past year.

The impacts are still being felt now...


Prior to the pandemic, companies had optimised their supply chains for MAXIMUM efficiency: the Just In Time process combined with assumptions that everything would continue as it was...

Then Covid hit the fan, Wuhan factories locked down and all of those assumptions stopped being true.

The interconnected world is muddling through, but freight costs remain high over a year later...

If I had to bet on one major innovation on the back of the pandemic, it would be in logistics.

It's something I've mentioned a few times before, but I didn't realise quite how antiquated some of the systems were until recently...

Many freight forwarders still rely on paper orders, fax, email, and excel to co-ordinate their shipments.

In a world where you can order anything you desire from the comfort of home AND usually expect it to arrive within a few days (or 30 minutes if its food), there's no way that can continue.

Innovation is coming.

Companies like Beacon & Flexport are already well-established with this goal in mind (CEO Ryan Petersen was on Odd Lots recently) ๐Ÿ‘‡

โ€ŽOdd Lots: How the Worldโ€™s Companies Wound Up in a Deepening Supply Chain Nightmare on Apple Podcasts
By now, everybody knows that global supply chains are a mess. Not a day goes by where there isnโ€™t news of some shortage or bottleneck. Chips, shipping containers, lumber, you name it. So how did it happen and how does it get unwound? On the latest episode of Odd Lots, we speak with Ryan Petersen, thโ€ฆ

And the incentives to improve this industry are undeniable...

  • Reduce uncertainty/fragility (always a big seller)
  • Improve efficiency (profitability)
  • Greening the economy

Ocean vs Air ๐Ÿ‘‡


Air freight is relatively simple.

It's faster, but far more expensive (especially at volume).

As long as passenger planes fly, air freight shouldn't experience much disruption.

Sea/Maritime Freight is a LOT more involved

Let's start with oil...




Remember the EverGiven/EverGreen disruption of the Suez Canal?

Oil prices rallied ~6% higher on the initial reports,yet softened a day later.

The initial price spike was down to regional pressures and the belief that it might be stuck for 'weeks'.

Pipelines can matter too, especially in areas of conflict... ย 

Armenia-Azerbaijan Clashes - Why do they matter?
Tensions between Armenia and Azerbaijan have the potential to impact the supply of natural gas and oil into Europe via Turkey and the Southern Corridor

Visual Capitalist

Onto container shipping ๐Ÿ‘‡

The China-U.S route is clearly the most important/valuable.

No chokepoints there either...

China-Europe is another matter altogether.

Chokepoints must be navigated.

Another route has opened up through the Arctic Circle, although the potential for this to be inconsistently accessible is obvious to anyone who's watched Deadliest Catch ๐Ÿ‘‡

Going back to the Covid disruption, the over-reliance on Chinese exports that started the ball rolling ๐Ÿ‘‡

More details ๐Ÿ‘‡

Whilst we've already seen plenty of political pushback against China and some companies have already started to diversify (e.g. Foxconn / Apple in India), it will take years to reshore and rebalance these supply chains.

Investment in African ports and infrastructure is likely to play a part in that too


The World Is Decoupling From China
There is a lot packed into this note. This is longer than I usually send out. Thereโ€™s a good reason though. This note could frame our investing outlook for the coming yearsโ€ฆ Itโ€™s worth bending the rules. Letโ€™s give your attention span a workout, and dive straight in. China stands increasingly โ€ฆ

Summing up, the routes will not change rapidly, yet geopolitical risks surrounding these chokepoints are unlikely to completely disappear.

This is essential knowledge...