Global Trade • March/April 2022 • INDUSTRY EXPERTISE

DATA BLACKOUT IN CHINA WILL HAVE SUPPLY CHAIN IMPLICATIONS NOW & IN THE FUTURE

China has spent the past two years largely shutting itself off from the rest of the world.

The country continues to impose strict COVID-19 lockdowns wherever cases are detected, suspending public transit, putting people into quarantine and rolling out massive testing plans.

But China’s isolation measures have gone well beyond pathogen control. One of the latest measures went into effect this past fall. China’s Personal Information Protection Law, which began Nov. 1, limits how much access and control the public, both domestic and foreign, has around data.

“Ships in Chinese waters are disappearing from tracking systems following the introduction of a new data law in China, frustrating efforts to ease bottlenecks that are snarling the global economy, according to three shipping sources directly impacted.”

The law increases government control over how domestic and foreign organizations collect and export China’s data. According to the Reuters piece, domestic providers in China have stopped giving information to foreign companies as a direct consequence of the new rules.

Ships are typically tracked around the world via their Automatic Identification System (AIS) transceiver. AIS data provides location, speed, course and other critical information to shipping companies.

According to data from VesselsValue, the number of vessels sending signals from China had plunged by nearly 90% in the weeks following the new law’s implementation.

The ramifications of the new law are far-reaching—and particularly troublesome to shippers that have invested in visibility services.

The whole purpose of visibility is to connect dots and bring data together. Now, the data laws in China have created a sort of black hole for some. It is possible weeks could pass before you have access to information about your shipment when it’s in portions of Asia-Pacific waters.

Shippers need to react and adapt. Resiliency in the supply chain is a sexy term tossed around frequently in the industry. If there was ever a time to be resilient and build a supply chain of the future that works for you, it’s right now.

One reason might be to forcibly dissuade imports, a trend that has been happening for at least the last decade. China has aimed to limit imports and focus on manufacturing at home as a way to improve its damaged economy.

Limited visibility can lead to congestion at points of entry and might make companies think twice about sending a ship to ports in China.

China’s endgame is believed by many to be self-reliance. Limiting data access to foreign companies only stands to benefit Chinese companies and shippers. Keep in mind, the AIS and other data still exists, China just isn’t sharing it with the outside world.

There are some workarounds at your disposal to avoid your shipments plunging into a gigantic black hole.

Some companies in the supply chain use data collected from marine traffic and vessels to stay abreast of where their containers are located and enable customers to see one seamless breadcrumb trail.

They maintain a high level of visibility by using terrestrial and satellite-based AIS signals, as well as receivers located on vessels that are able to pick up signals from other vessels in the vicinity.

Most would argue that tracking sailing is the easy bit, but how do we identify a container once the vessel berths or is in process of the transition to the next segment? New data companies are now focusing on how to harness drayage company data. The key data element that ties these sources is that container number.

Now is the time to take stock of your technological capabilities and react accordingly.

Absent using technologies that might counteract China’s new data laws, it might also be prudent to think about new shipping routes to better manage time expectations. A typical shipping route from China to the port at Los Angeles-Long Beach is somewhere between 25 and 30 days during normal conditions. Due to the supply chain issues, transits are peaking at closer to 55-day averages.

Now, with limited access to data at its origin, and long wait times occurring at the port, it’s a good time to consider places such as Savannah or Houston as shipping destinations.

Instead of the 25- to 30-day estimated timeframe, the lead time might increase to 45 days, but it’s much more predictable. Thinking creatively and using visibility to make those types of decisions is where the industry is going to have to go.

Companies have been talking about this for at least the last decade, but now they’re starting to make moves.

Is now the right time to consider alternatives to relying on China, which has seen inflation in its factories that has made countries such as India and Vietnam more attractive to buy from?

According to a Q2 Barometer report by Qima, about a third of global buyers and 38% of U.S. buyers said Vietnam was a place they intended to increase sourcing from in 2021.

Demand in China surged early in 2021, showing a rebound after the COVID-19 pandemic began, but the numbers have not returned to prepandemic levels.

Recent events could further change relationships with China, but it’s not like pushing a button. Massive changes like this take time to play out. It would be wise to take a long look at what this means for your organization and if it’s an attainable goal before making a hasty decision.

It’s never too late to have plans in place to deal with the disruptions like this data law that seem to continue to pop up.

While considering whether you’re relying too heavily on China right now is a worthwhile thought experiment, the near-term solution is to invest more heavily in visibility services to both provide valuable insight into your shipments, and also protect your bottom line.

Frankie Mossman is chief customer officer at Overhaul, an Austin, Texas-based supply chain integrity solutions company that allows shippers to connect disparate sources of data into a transparent situational analysis engine designed for the logistics industry. Her previous Overhaul roles were chief transformation officer and vice president, Operations, and before coming to the company she filled executive and management positions at Honeywell, Flextronics and Freescale Semiconductor.