The 25rd Annual State of Logistics Report prepared for the Council of Supply Chain Management Professionals (CSCMP) was released earlier this week (free for CSCMP members and can be purchased for $295). This report has consistently tracked U.S. logistics metrics since 1988 and is often of high interest to logistics, transportation and procurement professionals.
The report reflecting 2013 activity again notes a continued trend for increased logistics, transportation and inventory costs. More than ever, this should be of continued concern to manufacturers and retailers and their associated supply chain and product management teams. Similar concerning observations were noted by Supply Chain Matters in last year’s annual report.
Highlights and some observations of the latest report numbers are noted below.
The cost of the U.S. business logistics rose 2.3 percent in 2013 to $1.39 trillion, an increase of $31 billion from 2012. Logistics costs as a percent of nominal GDP were reported to have dropped to 8.2 percent, just about the same 8.3 percentage reported for 2012.
Most concerning from our lens, inventory carrying costs in 2013 rose another 2.8 percent, albeit less than the 4.0 percent increase reported for 2012. While interest costs rose slightly, inventory levels inched up leading to increased costs for taxes, insurance, warehousing, depreciation and obsolescence. By our calculation, the former components rose 9.2 percent or $28 billion from that reported in 2012. According to the report authors, the cost of warehousing was up 5.6 percent in 2013, as rates for warehouse space continue to rise. As a wise sage once exclaimed to this author, “warehouses are monuments to inefficient inventory practices.” That sage advice continues to reflect itself.
Overall inventory levels continued to rise despite the advent of advanced inventory management practices and historically low interest rates. The report includes a chart reflecting Total U.S. Business Inventories that visually indicates that total inventories in 2013 now surpass levels recorded in 2008, the peak before the great recession. With relatively low GDP growth levels, these numbers are alarming. With carrying costs increasing, industry supply chain teams need to seriously analyze why more overall inventory is being maintained. Consider that interest rates remain at historic lows, and what would be the incremental cost if they were not. We suspect that with high levels of global outsourcing and slower global transportation, that larger levels of pipeline inventory are being planned. We further suspect that planning and optimization models are not reflecting up-to-date inventory cost factors.
Another important concern brought out in the report is the current fragile state of the U.S. trucking industry with utilization rates remained close to 100 percent and fleet and driver capacity declining. High costs and regulatory issues are deterring new entrants to the industry. With the U.S. railroad industry operating at near capacity, reflecting building shortages of available specialty railcars, supply chain teams need to remain concerned about this area.
Data compiled in the 2013 report indicates the revenue growth trajectory of U.S. non-asset based services and Third Party Logistics providers continued in 2013 with revenues pegged at $146.4 Billion, an increase of $4.6 billion over 2012. Revenues broken out for 3PL’s rose 3.2 percent in 2013, lower than the 5.9 percent growth recorded in 2012. The most lucrative segment of 3PL services remains Domestic Transportation Management which grew an additional 7.2 percent in 2013. According to the authors, shippers continue to engage 3PL’s to ensure that they have capacity when required. However, the U.S. 3PL industry is shrinking in numbers as larger players acquire smaller ones, funded by a new wave of private equity interest. We believe that these trends are troubling and imply additional consolidation and structural change in the months to come. Carriers who own the assets are being economically squeezed and dis-intermediated from shippers, and without assets, transportation as a whole will encounter additional shocks.
Supply Chain Matters submits that the overall takeaways from the 2013 State of Logistics are once again dependent on the reader frame-of-reference. If you reside anywhere in the transportation and 3PL logistics sector, your reaction may be positive. However, that would be in inability to sense a longer-term disturbing trend of pending challenges regarding delivery of services. Distribution center operators and real estate interests are included. If your frame of reference involves a constant diligence for controlling overall transportation procurement and supply chain related operating costs, we again submit there are troubling areas that should motivate concern and attention.
Thus far in 2014, U.S. manufacturing activity continues to surge. According to the report authors, freight shipments are up 13.1 percent and so are rates. The global ocean container industry remains in a capacity crisis, and so is the U.S. rail and trucking industry. The State of Logistics, by our view is rather fragile, fueled by private investors looking to cash in on opportunities to make quick money without holding hard assets. That is not a healthy outlook.
Once again we offer the following insights:
- Procurement, supply chain planning, B2B and fulfillment teams can no longer assume fixed transport times and logistics costs in fulfillment planning, nor should they assume that contracting all logistics with a third party provider is the singular solution to reducing overall costs. By our view, the “new normal” is reflected in strategies directed at assuring consistency of service, deeper levels of business process collaboration delivered at a competitive cost.
- Procurement teams who context transportation spend in the singular dimension of cost reduction remains not wise, given the structural and dynamic industry changes that are occurring. There needs to be obvious deeper partnering that includes healthy exchange of expectations and desired outcomes.
- Similarly, S&OP teams must re-double efforts to further analyze and manage overall inventories with a keener eye on the overall stocking point trade-offs and costs of carrying inventory. With more sophisticated tools available to manage and optimize end-to-end supply chain inventories, the open question may be in the quality of the data that is fed into these tools, especially the realities of increased carrying costs. Teams are not fooling anyone by allowing data to remain static. Today’s global logistics environment is not static, but rather highly dynamic and complex. Decision-making data must reflect this state.
- The recent announcements from both FedEx and UPS regarding the initiation of dimensional pricing on ground shipments in 2015 will have an impact on online B2B and B2C fulfillment trends, in particular whether free shipping as a practice remains a viable strategy. Be watchful of this area.
As was the case in last year’s Supply Chain Matters commentary, the U.S. economy continues to show even more promising signs of manufacturing renewal and export recovery. All of this is dependent on a business logistics infrastructure that demonstrates world-class competitiveness. If there is a clear learning from the past three to four years, it has been on reality that supply chains exist and are now dependent on a global network of business logistics. The major decisions related to supplier and product manufacturing sourcing is now more vested in the tradeoffs of global logistics and transportation costs and the industry coming to grips with troubling capacity constraint trends.
We again encourage our readers to share their observations regarding the current state of both U.S. and global logistics, its implication toward shifts in global sourcing, and implication on current operations planning and procurement management processes.
©2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
This week, U.S. and select global equity markets experienced a significant selloff in stocks. The principle headline for the Wall Street Journal and other business media was that markets are spooked from a round of weak manufacturing activity reports, primarily concerning the United States. It is amazing that Wall Street now pays so much attention to supply chain and manufacturing indices, a rather clear sign of how procurement, manufacturing and supply chain activity across the globe has become so indicative of the state of the global economy. That is why we now include a trending summary report of key PMI activity across the globe in our Supply Chain Matters Quarterly Newsletter.
Candidly, we do not view the latest January PMI activity as overly concerning, rather an indication of the dynamic planning of today’s industry supply chains responding to supply and demand needs in their particular markets.
The Institute of Supply Management (ISM) PMI reflecting manufacturing activity across the United States posted a 51.3 reading in January, which was a decrease of 5.2 percentage points from the December level of 56.5. While the headline may be concerning, that level of 51 was the same as reported in December 2012 and again in March 2013. It remains an indicator of expanding activity. A look into detailed indices reflects that the contraction probably had more to do with lousy winter weather, coupled with supply and inventory adjustments. Of the 18 total manufacturing industries that make-up the index, 11 reported growth in January. Many were in the lower tier of industry supply chains such as metals, plastics, rubber and electrical components. While the new orders index indeed decreased by 13.2 percentage points, customer and other inventories also decreased reflecting a work down of current inventory.
If there is a concern, if should be directed at increasing input prices where the index rose 7 percentage points. It was our prediction that commodity prices would hold level in 2014 given the trends going into the start of the year. Procurement teams need to be especially vigilant regarding this trending.
Business media has further reported that the current sell-off across global equity markets has been motivated by concerns regarding ongoing turbulence among former growing emerging market economies and the effect that will have on corporate profits. Supply chain leaders should share that concern. However, we advise a continued monitoring of overall global supply chain activity, which up to January, indicates continued positive trending. Including January, the J.P. Morgan Global Manufacturing & Services PMI which is an indication of the combined output of the world’s manufacturing and service sectors has risen for 16 successive months. In January, the Markit Eurozone Composite PMI reflecting manufacturing activity across the Eurozone, a huge global market, posted its highest reading since June 2011 indicating momentum across Europe is finally on the upswing.
The one concerning manufacturing indicator is that of China, which dropped below the 50 mark in January, to a reading of 49.5, which is an indicator of contraction. That indeed should remain the concern of industry supply chains and investors.
It is unfortunate that Wall Street continues to take such a narrow, in the quarter perspective concerning corporate growth and profitability. While industry supply chains are becoming much more adept at responding and synchronizing product demand and supply imbalances on a quarterly, monthly and even daily basis, Wall Street continues to view manufacturing activity in a rather short term, in-the-quarter mentality.
That does not help companies and supply chain teams in their efforts to continue to invest in capabilities for managing complex, dynamic and ever changing global supply chains.
© 2014, The Ferrari Consulting and Research Group LLC and the Supply Chain matters Blog. All Rights Reserved.
The 24rd Annual State of Logistics Report prepared for the Council of Supply Chain Management Professionals was released earlier this week (free for CSCMP members and can be purchased for $295, both options available on the CSCMP web site). This report has consistently tracked U.S. logistics metrics since 1988 and is often of high interest to logistics and transportation professionals. The current report that tracks 2012 activity notes a continued trend for increased logistics, transportation and inventory costs. In our view, this should be of concern to manufacturers and retailers and their associated supply chain and product management teams, especially since these trends continue to manifest in 2013. Similar observations were noted by Supply Chain Matters concerning last year’s annual report.
The report authors and some business media have positioned the primary takeaway headline for this year’s report with statements that overall logistics costs are growing at about the same rate as U.S. GDP. We caution our readers to not be lulled by that takeaway, since by our analysis, the numbers reveal rather troubling implications that warrant additional management attention. Long-time report author, Roaalyn Wilson poses a question to readers: “Is This the New Normal?” We certainly do not hope that this is the case.
Highlights and some observations of the latest report numbers are noted below.
The cost of the U.S. business logistics rose 3.4 percent in 2012 to $1.33 trillion, an increase of $43 billion from 2011. Logistics costs as a percent of nominal GDP were reported to be 8.5 percent, roughly the same as in 2011. This and last year’s report stress that the overall U.S. economy continues to exhibit lackluster GDP growth. From 2009, the previous low point of U.S. economic recession, to 2012, GDP grew by roughly 12.5 percent during the three year period. However, the cumulative total of logistics costs increases from 2009 to 2012 increased by roughly 21 percent, reflecting an overall increase of $230 billion. That should be a cause of definite concern for the supply chain management community, since logistics costs over these past three years have increased at twice the rate of GDP growth. The report includes a chart that tracks U.S. business logistics costs from 2003 to 2012. The visual of that chart makes clear that U.S. logistics costs have now reached levels incurred in 2008, and if the trends continue, could surpass the peak year of 2009. With a lackluster U.S. economy, that is not a healthy trend.
As was the case in 2011, both inventory carrying and transportation costs rose in 2012. Overall inventory levels continued to rise despite the advent of advanced inventory management practices and historically low interest rates. Inventory carrying cost rose 4.0 percent in 2012 while business inventories rose in all three out of four quarters, ending the year at 3.9 percent higher than in 2011. Once more, retail, wholesale and manufacturing subcategories of inventory all climbed during the year. According to the report authors, higher inventories combined with historically low interest rates led to a 6.9 percent decline in the interest component of carrying costs, and with normal interest rate conditions, the change would have been in the other direction. The culprit to increased carrying costs, by our view, is reflected by a 7.6 percent increase in the cost of warehousing in 2012. If you combine the reported 7.6 percent increase in carrying cost reflected in 2011, with the 4.0 reported for 2012, there has been a two-year increase of 11.6 percent. That is far higher than any interest rate increase, and should be another area of concern, especially if money interest rates begin to rise. The report author concludes that inventory management has made great strides in the last year. Supply Chain Matters respectfully disagrees and cautions supply chain and business executives to not be lulled. While major supply chain disruption events and increased risks have been clearly on the increase, it should not be a cause for aggregate inventory increases. We have more sophisticated inventory planning and management tools available, which leaves an open question on management practices and effective use of these tools.
Transportation costs were reported as up 3.2 percent in 2012. That is on top of the 6.2 percent reported in 2011. Report author Wilson concludes that the lower rate of increase in 2012 was because of weak and inconsistent shipment volumes and strong pressure to hold rates. In the report, she points to the same structural trends affecting global transportation that we at Supply Chain Matters have raised in a number of commentaries throughout the year. Ocean container capacity jumped by over 7 percent as shipment demand fell sharply, resulting in 7 unsuccessful attempts by carriers to increase rates during 2012. Air freight revenues increased by 3.1 percent but total tonnage declined over 2 percent. The report acknowledges chronic overcapacity and deteriorating yields in the air freight sector. The report quotes an Armstrong and Associates source indicating that freight forwarder costs, representing non-asset based freight service providers and 3PL’s, rose by 5.4 percent. On the positive side, the cost of rail transportation increased by only 4.9 percent vs. the 15.3 increase reported in 2011.
Supply Chain Matters submits that the overall takeaways from the 2012 State of Logistics are once again dependent on the reader frame-of-reference. If you reside anywhere in the transportation and 3PL logistics sector, your reaction may be positive. However, that would be in inability to sense a longer-term disturbing trend of pending challenges regarding delivery of services. Distribution center operators and real estate interests are included. If your frame of reference involves a constant diligence for controlling overall transportation procurement and supply chain related operating costs, we again submit there are troubling areas that should motivate concern and attention. In one year alone, the imbalance of forces affecting global and domestic transportation have magnified, making the long-term contracting for transportation services a difficult and fluid effort.
Procurement, supply chain planning, B2B and fulfillment teams can no longer assume fixed transport times and logistics costs in fulfillment planning, nor should they assume that contracting all logistics with a third party provider is the singular solution to reducing overall costs. By our view, the “new normal” is reflected in consistency of service, deeper levels of business process collaboration delivered at a competitive cost. Procurement teams approaching transportation spend in the singular dimension of cost reduction is also not wise, given the structural and dynamic industry changes that are occurring. There needs to be obvious deeper partnering that includes healthy exchange of expectations and desired outcomes.
Similarly, S&OP teams must re-concentrate efforts to manage overall inventories with a keener eye on the overall stocking point trade-offs and costs of carrying inventory. With more sophisticated tools available to manage and optimize end-to-end supply chain inventories, the open question may be in the quality of the data that is fed into these tools, especially the realities of increased carrying costs. Teams are not fooling anyone by allowing data to remain static. Today’s global logistics environment is not static, but rather highly dynamic and complex. Decision-making data must reflect this state.
We again re-iterate a point made from our commentary regarding last year’s report. Benchmarking logistics costs to a pre-recession level of 9.9 percent of GDP in 2007, the termed precipice of logistics activity is defeating for manufacturers and retailers. It is a benchmark more appealing to logistics and transportation providers. We suggest that the most important report aide for manufacturers and retailers be the current chart (noted as slide 7) that tracks logistics costs as a percentage of GDP by major geographic region. The report authors should consider expanding this chart to report the trending of major geographic business costs by region, by year, from 2008, the start of the global economic recession.
The U.S. economy continues to show promising signs of manufacturing renewal and now, export recovery. All of this is dependent on a business logistics infrastructure that demonstrates world-class competitiveness. If there is a clear learning from the past three to four years, it has been on reality that supply chains exist and are now dependent on a global network of business logistics. The major decisions related to supplier and product manufacturing sourcing is now more vested in the tradeoffs of global logistics and transportation costs.
We again encourage our readers to share their observations regarding the current state of both U.S. and global logistics, its implication toward shifts in global sourcing, and implication on current operations planning and procurement management processes.
©2013 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
Supply Chain Matters has brought previous attention to a significant trend occurring in global transportation. Large numbers of manufacturers and service providers have placed a greater focus on transportation cost efficiencies and/or flexibilities. That is good news for bottom line budgets but rather troubling news for global carriers or global logistics services providers who have invested in expensive capacity and infrastructure. Recent earnings report from FedEx, UPS, Ceva Logistics and other global transportation providers, to name just a few, reflect this building shift within the industry. More sophisticated planning has allowed global supply chains to not rely on priority shipping modes but rather rely on non-premium or multi-modal surface transportation options. Erosion in global transportation rates has in-turn provided global shippers’ added flexibilities in the modes they elect to move goods to consuming markets.
One of the most time-sensitive industries is that of fresh-cut flowers. The Wall Street Journal recently reported that even this $14 billion industry has responded to increased premium air freight costs. In essence, the floral industry is responding to cost conscious retailers who want to reduce the input costs for flowers. A spokesperson for Netherlands based FloraHolland, the world’s largest floral wholesaler predicts that upwards of 30 to 40 percent of floral shipments from Latin America, along with 20 percent of shipments from Africa to Europe could be routed by ocean container in the next five years. That is a rather significant shift emanating from a stalwart industry that had total reliance on global air freight.
According to the WSJ, improvements in chilling and container monitoring technologies have prompted this building shift toward ocean shipping modes, particularly for imports to Europe which is a rather large market. Industry sources were cited as indicating that certain roses, carnations and other floral varieties do not suffer ill effects from sea voyages provided temperature environment is consistently maintained.
Transportation professionals are fully aware that ocean container carriers are making big and rather expensive bets in bringing a new generation of larger, more efficient mega-ships into service during the next five years. Today, there is far too much ocean container capacity chasing lowered volumes. Industry leader Maersk has again downgraded its outlook for global trade while the industry itself endures its 15th consecutive week of declining market shipping rates. Maersk now forecasts global container demand to grow just 2-4 percent in 2013 vs. a prior forecast of 4-5 percent in February. While newer ships will address needs for more efficiency and flexibility, the industry itself is in a Darwinian struggle as to which players can financially survive the transition. The Financial Times recently reported that a fifth of global container capacity has now been idled worldwide.
Global multi-modal transportation and logistics providers are obviously noting the building momentums in this modal shift and will invariable adjust their business strategies in the coming months. However, the biggest question mark is how many existing ocean container carriers, suffering building economic loses from the current gross condition of excess capacity, will survive to serve a different global transportation landscape several years from today.
There are other industry shifts to cite as examples.
Today’s Wall Street Journal notes that the proposed $2 billion Freedom pipeline project that is proposed to ship refined oil products from the lucrative oil field of Texas to California based refiners has failed to gain the interest levels of the major oil refiners in that region. Instead, they are relying on existing tank car shipments via rail lines to feed fuel hungry west coast markets. According to the Association of American Railroads, rail carloads of oil nearly tripled from 2011 to 2012. A recent boom has also come from new sources of crude in the U. S. Northern Plains and Appalachian regions that now increasingly rely on rail tank car movements to core refining distribution points. According to WSJ’s reporting, refiners are relying on rail shipments because of the flexibilities it provides in allowing firms to access crude supplies from different geographic regions at different prices, a flexibility not offered in a fixed pipeline.
This week, global 3PL CEVA Logistics, which provides logistics services to service sensitive consumer, healthcare, pharmaceutical and major high tech markets, reported a 6 percent decrease in earnings citing an overall soft global logistics markets, under performing contracts and impacts of business switching to ocean transport. CEVA , an asset light 3PL, has already taken steps to re-capitalize its balance sheet and raise new capital and has taken actions to offload some remaining fixed costs. At this week’s Smarter Commerce Summit, IBM announced a four year contract with CEVA to utilize the cloud-based IBM Sterling Commerce B2B platform and integration services for its customers. At the time of its re-capitalization efforts in April, L.M. Schlanger, CEVA CEO interviewed with Logistics Management and was quoted: “… customers are demanding more transparency and more visibility and more traceability and control of their supply chains at any given point in time.” He alsopointed to increased internal IT investments and applications to meet the increased needs of customers.
Thus, multiple shifting forces are impacting global transportation. The current economic crisis that has severely impacted Eurozone markets, and the building momentum toward nearshoring occurring in some industries are impacting current shipping volumes and rates. Longer term, more sophisticated shippers with better planning capabilities and leveraged use of advanced technology have discovered means to rely on more economical or more flexible modes of transport. That is the long-term trend.
Insightful industry officials are now or should be connecting the dots. Investing in appropriate technologies and services our beginning to yield savings in a cost area that has begged attention for many years. At the same time, carriers and logistics providers that have to invest in rather expensive assets and global transportation capacity are making their bets on where the long-term industry trends end up.
The takeaway for procurement, supply chain and product management teams are to not at all assume business-as-usual in short and longer-term transportation strategy and contracting. Do your homework, stay informed of continuing industry shifts and implications. Select your partners wisely, those that can fulfill both today’s and tomorrow’s business needs. Teams should also be evaluating investments in more synchronized fulfillment execution across the end-to-end supply chain including the journey toward supply chain control tower.
We are here to help you sort out these trends and implications.
Supply Chain Matters provides an update to our previous alert regarding a labor strike that occurring in the port of Hong Kong, the third busiest ocean container port in the world. Last week we alerted procurement and supply chain teams to exercise their disruption scenario plans regarding the real threat of additional delays for inventories that are scheduled for transit utilizing the port.
Media reports this week indicate that the nearly 500 striking dock workers continue to disrupt port operations. Talks were supposed to resume yesterday. A published report by Reuters quotes the Hong Kong Association of Freight Forwarding and Logistics as estimating that 120,000 twenty-foot equivalent (TEU) containers are now stacked up as the strike enters its 14th day. Reports from local media continue to indicate port delays of up to 60 hours. Container shipping lines such as Evergreen Marine and Mitsui OSK Lines are either diverting vessels or skipping the port of Hong Kong altogether.
Readers within Hong Kong or directly managing Asian based ocean shipping can perhaps update the on-the-ground situation in the Comments section below this posting.
This strike has taken on social labor rights implications. Hong Kong’s richest man, billionaire Li Ka-shing controls the majority of the Port of Hong Kong through the entity of Hongkong International Terminals Ltd., along with other global port facilities through the broader Hutchison Whampoa Ltd. name. Terminals backed by Hutchinson have a reported 46 percent share in the Port of Shenzhen, helping to recoup any operating losses incurred in Hong Kong. Thus, according to shipping analysts, Li has little to lose in the ongoing disruption. Some are speculating as to whether this is a one-time disruption or an overall structural change in shipping movements in the months to come.
The roughly 500 striking dock workers, who are seeking a 20 percent hike in wages, claim that they have not had a pay raise in 10 years as the cost of living has soared within Hong Kong. They further claim difficult working conditions that do not include any bathroom breaks. The strike is reported as hitting a nerve in the city state, where the growing wealth gap has caused turmoil in the local government.
By our view, one thing seems to clear, and that is that supply chain teams should anticipate additional shipping delays involving ocean containers out of China’s coastal regions. That will more than likely have inventory impacts, and teams need to assess their fulfillment plans for the early and late summer periods. Since some goods route through Hong Kong for certain tax purposes, there may be additional financial implications as well.
Throughout 2012, we posted multiple rants concerning the ocean container shipping industry, its arrogance in taking a one-sided parochial view of customer value, and on its general abuse of the tenets of industry capacity vs. demand. Readers can track our rants by accessing this previous posting in August of 2012.
To validate how visible this situation has become for global supply chain teams, and that we are not the only outlet to call it for what it is, readers should reference this week’s posting by Robert Bowman on SupplyChain Brain, Economics 101: Did Ocean Carriers Miss the Lecture?.
The opening paragraph of this commentary clearly states the obvious:
“Judging from their actions, ocean carriers would love to toss out those irritating economics textbooks, with their tedious lessons about supply and demand. Too much capacity? No pricing discipline? Sluggish volume growth? Forget about it. Why should any of that prevent them from raising freight rates?”
Bowman highlights how ocean container carriers continue to defy market dynamics on a short-term basis by artificially removing capacity, slowing down vessels, and then raising rates to trump-up hemorrhaging balance sheets. The commentary also poses the question as to whether these same carriers can carry their parochial sense of urgency into 2013., especially with new and larger capacity mega-ships scheduled to continue to assume service later this year and next year as well. This commentary also brings out a stark reality, in spite of the most optimistic forecasts of Trans-Pacific shipment volumes for 2012, the actual volume increase was a mere 0.3 percent. That is the clear sign that continued economic challenges in the global economy, a battered consumer and the resurgence of near-shoring of manufacturing are making their mark in global trade.
This month, a series of ocean container rate increases is scheduled to go into effect to continue to compensate for overcapacity. According to Bloomberg, industry leader Maersk Line alone cut overall capacity on its Asia to Europe route by roughly 21 percent in 2012. It was also disappointing to also notice another article this week, indicating that Maersk Line will now stop Asia to U.S. east coast service via the Panama Canal in favor of routing its larger ships through the Suez Canal to reach the U.S. east coast from Asia.
What’s a couple of extra transit days, anyway? Surely you have enough built-up safety stocks!
Thus despite industry attempts to trump-up rates, the realities of a slowdown in global shipping and continued overcapacity are stark, and as the expression goes, “the emperor has little clothes”. Something has to give, eventually.
These conditions are further motivating small and medium sized suppliers and product producers to rely more on third party logistics and service providers for consolidating shipment volumes and to broker their buying power for more reasonable rates, causing yet another set of market dynamics.
Larger independent global shippers may well garner better rates by camping out in the short-term spot market vs. longer-term contracts. And to add more spice, air freight carriers have also reduced global airlift capacity.
Ocean container lines tout their presence as the facilitators of global commerce. If these carriers do not soon deal with the realities of global supply chains they may well find themselves as once again, facilitating major asset disposal sales.
The voices are growing.