Looking for a quick summary of the top supply chain and logistics news and trends making waves this week? Read our weekly "Supply Chain Snapshots" for helpful summaries and commentary to get you up-to-speed on the news you need to know.
#1 Trucking Conditions Crashed to Pandemic Lows This Fall
FTR Transportation Intelligence said that October 2022 was the worst trucking environment since April 2020.
At the same time, the American Trucking Associations said its November for-hire tonnage index had its largest monthly drop since the pandemic began.
Some experts predict that trucking industry conditions will remain challenging through 2023.
According to the Bureau of Economic Analysis, Inflation-adjusted consumer spending on durable goods and homebuilding declined in Q2 and Q3 of 2022. This downturn indicates that there is less freight for truckers to move, meaning less demand for trucking.
Owner-operators and small trucking fleets faced numerous challenges as a result of the 2022 trucking recession.
To add to the struggle, the retail price of diesel has increased more than rack prices, and the spread between the rack and retail prices is putting more pressure on small truckers.
Trucking companies with more employees can secure fuel discounts because they are buying in bulk, while smaller fleets lack the same resources.
Gas stations often wait to drop prices if rack prices dip, but they generally react quickly to rack price increases.
#2 The Supply Chain Crisis Is Coming to an End—But 2 Looming Threats Could Reignite the Chaos
The slew of ships off the coast of Long Beach is gone, but supply chains are still experiencing trouble. It’s predicted that more labor disputes could cause disruptions to reappear.
"I think we can all breathe a sigh of relief, frankly," expresses Flexport Founder and Co-CEO Ryan Petersen on Flexport’s December market updates webinar.
Supply chains are operating better now than in the last two years, but there are still several risks that could disrupt them again.
The most dominant factor causing back orders and empty shelves was the increased transit time from Asia to the United States via ocean shipping. At one point, shipping containers took 120 days to go from a warehouse in China to a warehouse in the U.S. That number now stands around 75 days.
Today it costs $2,000 to ship a 40-foot container from China to a U.S. West Coast port.
It’s predicted that supply chains have been off balance due to the 1:1 inventory-to-sales ratio that started in June 2021. As of October 2021, it sat at 1.2, which is improved but still below 1.5 where it hovered in 2019.
Issues are cropping up all over the industry including major bottlenecks, understaffed railroads, and unfinalized employee contracts for workers at the ports of Los Angeles and Long Beach.
UPS's contract with its Teamster drivers expires in July 2023, and the union president has promised a tough negotiation and already threatened a strike.
According to Jason Seidl, Managing Director of Cowen and Company, a return to seasonal rushes and lulls, without massive, global disruptions, will be the sign that supply chains are "back to normal".
#3 Port of Los Angeles, Long Beach To End Terminal Dwell Fee
The Port of Los Angeles, the nation's largest port complex, said it will end a program that threatened to fine ocean carriers for long-dwelling cargo. This action is perceived as another sign of easing congestion on the West Coast.
The Ports of Los Angeles and Long Beach will phase out the option to collect a terminal dwell fee on January 24, 2023.
Shippers have avoided the West Coast in recent months due to uncertainty over dockworker negotiations, leading to booming volumes and shipments at East Coast and Gulf ports.
Ports in areas including New York and Houston might create their own dwell fees as they manage record-breaking volumes and congestion.
Meanwhile, the Port of Los Angeles is focused on rebalancing cargo flows and bringing more containers back to the West Coast.
#4 Small, Midsize Retailers Search More for Nearby Suppliers: Report
As retailers cope with pandemic-related supply chain woes, a new survey of 300 small and midsized businesses from the software firm Capterra found that 88% of companies are switching or plan to switch suppliers closer to the U.S. in 2023.
Small and mid-size businesses' decision to shift their suppliers closer to the U.S. is part of a broader nearshoring transition.
The impacts of the pandemic on global trade have shown suppliers, governments, and vendors that they must repair the global supply chain to prevent similar disruption in the future.
#5 Wine Is Getting Pricier Thanks to a Logistical Nightmare
Wines of recent vintage are being impacted by a combination of drought and extreme heat, supply chain turmoil and global supply shortages of glass, cork, and aluminum.
Extreme heat is especially wreaking havoc on the wine industry, causing prices to rise and supply to dwindle. The heat is impacting the ability of grapes to grow and ferment into wine.
Winemakers are adapting by experimenting with different grapes and growing locations to try and find varieties that can withstand the heat.
Winemakers can't easily switch to a different type of bottle as that's subject to legal rules and physics parameters. Sparkling wines need thicker, pricier glass to hold the pressurized drink. Some countries also mandate which types of bottles need to be used for certain types of wine.
“Most people don't think about raw materials that are involved in wine production. Obviously, you've got the grapes—everybody gets that bit. But people forget that you have a bottle, you have a cork, you have a capsule.”
Daniel Lambert, UK-based wine importer
#6 Years of Global Supply Chain Chaos Could Mean a Nearshoring Jackpot for the Americas in 2023
Nearshoring has slowly taken off over the past year, as COVID lockdowns, supply chain delays, and geopolitical strife disrupted operations at key manufacturing hubs.
U.S, Manufacturers faced acute shortages of everything from steel and aluminium to computer chips and plastic resins.
A recent survey of 179 companies by the Association of Equipment Manufacturers found 98% of them faced continuing supply chain problems and 60% said problems have worsened.
Some manufacturers are confident the worst is over. “There’s a sense that everybody is finally digging out” from the shortages of the past two years." - Keith Johnson, president of Kondex Corp
We’ll be back next week with our last Supply Chain Snapshots of this year. Whatever you celebrate, however you celebrate, we wish you a happy, healthy holiday!
