As we approach the midpoint of the year, conditions are shifting for carriers.
With rising fuel costs, increased demand for shipping services on the Asia-to-US route, and strained capacity, ocean carriers have implemented a General Rate Increase (GRI).
Additionally, there is sustained high demand in the air freight sector. These modes contrast sharply with the domestic freight industry, which is more subdued as trucking and warehouse demand remain soft.
In the long term, the global supply chain continues to shift due to geopolitical developments and changes in cost dynamics, influencing worldwide trading strategies and accelerating nearshoring efforts.
Ongoing international and domestic disruptions necessitate the adoption of flexible shipping strategies. Internationally, vessel diversions due to the attacks in the Red Sea persist, causing delays and equipment shortages on major trade lanes. While North America's rail industry faces increasing pressure to operate more efficiently, leading to union tensions.
Looking ahead, potential disruptions are anticipated in Q3 from a possible rail strike in Canada and in Q4 from the North American East Coast port contract renewal. However, there is optimism for mitigating its impact.
Click here to access this month's full update.
Highlights from this month's update include:
- Nearshoring, particularly the China+1 strategy, emphasizes trade routes to and from Mexico, India, and Vietnam for North American and European cargo
- The North American rail industry is experiencing increased tension with unions
- Ocean carriers declared a General Rate Increase (GRI) in May, reversing the trend of rate normalization
- Over-the-road carriers face heightened pricing pressure due to persistent overcapacity in the trucking market.
- Air demand continued to rise in April, driven by increased volume from Asia and a modal shift to avoid delays related to the Red Sea.
- Parcel carriers are projected to raise rates in Q2, ending a recent trend of declines over the past three quarters
- Warehousing and vacancy rates have stabilized amidst reduced demand and recessionary concerns
Further reading:
Looking for the next frontier of margin enhancement? Think structurally!
- Based on our experience, clients can reduce supply chain costs by 8-15% and inventory requirements by 5-15% through network redesign. We ask five key questions of supply chain leaders looking to achieve the next tranche of margin enhancement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.