TAKEAWAYS: Shaping the Future of the Global Supply Chain

From shipper expectations for the last quarter of 2023 to a regulations roundup, here’s how companies can navigate the peak season and keep freight moving while limiting costs.

Shippers Share High Hopes

What are shipper expectations for Q4—traditionally the busiest shipping season of the year? The latest BlueGrace Logistics Confidence Index finds:

Shipment Volumes and Peak Season: What to Expect

Facing a complex international scenario of inflationary pressure and high interest rates, there is a ton of speculation around the effects of the 2023 peak season, with global stocks signaling caution and reflecting a slower pace of replenishment.

The cycle of shipments and restocking for 2023 will be very similar to 2022, when the peak season did not increase the respective volumes, experts predict.

“It is expected that the rising interest rates around the world, except in Japan, will make inventory replenishment and shipping less necessary,” says Mario Veraldo, CEO MTM Logix, a logistics company. “However, unlike 2022, when rates were reduced during the high season, there is an expectation that rates will have a small increase this year.”

Veraldo attributes this recovery to global increases in specific product categories, reflecting a growing relationship in product categories in different geographical regions.

“These trends provide insights into current market dynamics, highlighting the importance of adaptability and strategic planning in a complex global market environment,” he notes. “The main challenge lies in the replenishment process in many sectors, which generally involves little data and relies heavily on intuitive ‘gut feelings’. This approach contributed to the whip effects experienced during the pandemic.”

The order book for container ships is at its highest ever, reflecting the restructuring of supply and demand in the sector. This aligns with the trends in global inventory figures, interest rates, and specific product category increases, all of which are influencing the current freight rate dynamics.

These trends suggest a scenario in which, unless the world economy grows and the movement of goods increases, freight rates could fall below pre-pandemic levels. This could lead to a scenario of prolonged deflation, Veraldo notes.

Yellow Went Under. Now What?

Now that Yellow Corp. is out of business, what can shippers do to keep freight moving while limiting costs?

With Yellow’s operations accounting for 9% of total U.S. LTL capacity, its collapse immediately tightened up the market. Other carriers are happy to keep former Yellow freight moving—for a price. Analysts say Yellow rates were 10-20% below competitors, and carriers are raising rates in the aftermath of the bankruptcy.

Pricing aside, carriers are also using the Yellow collapse to optimize the freight they move. If new loads from former Yellow customers are a better, more profitable fit for the carrier’s network than existing freight, they take action to purge less-desirable freight.

How? Mid-contract, out-of-cycle pricing actions. Shippers receive notice of a major rate increase or accessorial charge, and they have the choice to accept it or cancel their contract. An example of this tactic is a carrier changing their rules tariff on lightweight shipments. Carriers have a rule in their tariffs document called the “cubic capacity minimum” that applies an alternate rate or the standard rate—whichever is highest—to lightweight, low-density shipments of 750 cubic feet and greater that weigh 6 pounds per cubic foot or less.

For some carriers, the cubic capacity minimum now has been updated to apply to shipments of 350-750 cubic feet at 4 pounds per cubic foot—targeted to price out light, fluffy freight and smaller shipments. The shift makes shipments as small as three pallets eligible for the cubic capacity minimum, down from the previous 6 pallets threshold.

The cyclical nature of transportation supports the fundamentals for shippers: Build lasting relationships and maintain favorable contracts by upholding practices that make them a shipper of choice.

But careful analysis can also pay off. Identifying lane imbalances can allow shippers to capitalize on major differences among carriers that yield meaningful cost savings.

Success in today’s LTL market requires investing in the give-and-take of long-term carrier relationships and digging deep to capitalize on opportunities when market conditions work in their favor.

– Kevin Day, President, LTL, AFS Logistics

Taking a Hard Look at Drayage

Takeaways inline1 0923The U.S. drayage industry is poised to grow from $6.1 billion in 2022 to $8.3 billion by 2027. A new report from PortPro, a drayage software provider for drayage carriers, identifies the following trends:

•  Primary growth drivers come from a global increase in consumer demand for ecommerce. Areas to watch for more future growth include electronics, food and beverage, autos, chemicals, oil and gas, and pharmaceuticals.
•  Drayage is at a technological crossroads. Growth-minded drayage carriers are adopting technology to digitize operations and improve efficiency and services.
•  Increased investments to strengthen the infrastructure of the entire port ecosystem to accommodate growth in consumer spending and imports. Improvements to bridges, new equipment, new larger vessels, overall operation expansion, new technologies, and more employees impact all players.
•  A sustainable future is top of mind, but slow in adoption. Carriers share concerns for building infrastructure to support e-fleets and other AI opportunities on the road and in warehouses.

Regulations Roundup

No matter what industry your company is in, you need to stay aware of relevant regulations and take steps to comply.

Here is a brief roundup of some major government agencies in the logistics and supply chain space and their current rules.

Federal Motor Carrier Safety Administration (FMCSA)

The FMCSA regulates commercial motor vehicle (CMV) safety in the United States. This includes regulations on securing cargo, driver hours of service, and vehicle maintenance. Recent FMCSA rules include:

Food and Drug Administration (FDA)

The Food and Drug Administration regulates the safety of food, drugs, and medical devices including how they are manufactured, transported and stored.

While there are no new transportation regulations specifically for 2023, the FDA’s key transportation regulations include:

Environmental Protection Agency (EPA)

To reduce greenhouse gas emissions and air pollution from vehicles, the EPA has proposed several new transportation regulations for 2023, including:

Takeaways inline2 0923

Governing Bodies

Here are some other government agencies issuing regulations that may affect your supply chain and logistics operations:

Occupational Safety and Health Administration (OSHA) regulates workplace safety.

Customs and Border Protection (CBP) regulates the import and export of goods.

Department of Transportation (DOT) regulates the transportation of goods by air, land, and sea.

Securities and Exchange Commission (SEC) regulates the financial aspects of supply chain operations.

Deja una respuesta