By Kyle Peschler
From the September/October 2024 Issue
With uncertain times looming over, the logistics industry has seen its share of difficulty when it comes to transportation and distribution of products. While shippers and freights have experienced hardship in the past few years, the advancements in technology are starting to show a brighter picture, allowing for products to be transported globally with ease.
Based on the Council of Supply Chain Professionals’ “Annual State of Logistics Report for 2024”, forwarding, third party logistics (3PL), ports, air, parcel, and macroeconomics were just some aspects of logistics that had obstacles to overcome this year.
The global economy will experience slow growth until new economic engines are found and investment calculus is solved. High interest rates and inflation continue to exert drag globally, geopolitical instability and trade fragmentation will continue to create disruptions. Finally, nearshoring will counterbalance toward stability in global supply chains.
Freight demands are expected to rise. Shippers are taking advantage of the lower freight rates and service reliability related to ocean services. As a result, some major ocean carriers are adding air capacity of their own to fill out their end-to-end logistics networks.
For the remainder of this year, large shippers are turning away from “single sourcing” due to falling parcel volume and intensified carrier competition. Shippers are seeking a more diversified carrier base and maturing rate shopping capabilities. Shippers have started to rethink value of speed and optimize as needed for their product-centric customer experience, mixing regional carriers and USPS together.
3PL faces significant challenges such as low freight rates and excess capacity. These challenges could lead to further consolidation among smaller players and those dependent on venture capital funding. Different 3PLs and shippers are testing different models to participate in the market, with asset-light 3PLs expanding into asset-heavy spaces. Shippers have begun marketing their internal logistical capabilities externally.
The freight forwarding sector has been burdened with weaker global demand levels, excess carrier capacity, ongoing labor shortage, and heightened geopolitical uncertainty. With these issues, forwarders are shifting gears and creating long-term client stickiness through scale-based advantage in rates, routing optionality and flexibility, and better supply chain visibility.
With downturn in consumer demand after the pandemic has left carriers with a stubborn surplus of capacity, freight demand, and plunge in rates. Until there is an increase in rebuilding of retail and business inventories, improvement in consumer sentiment and housing market index, and cut rates, there won’t be a balance of power to change transportation assets. Technology companies have begun to turn focus and AI capabilities to optimize transportation mix and better utilize assets.
