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Freight Rates Falling as Demand Slows

Slowing demand, and the stagnation of the U.S. economy, has started to reduce the cost of shipping rates nationally. The reduction in transportation costs has caused some companies to renegotiate their existing shipping agreements, after a surge in pricing caused by the pandemic.

This is good news for commodities producers and retailers, because after two years, they are starting to get some relief. Rates shot up to nearly $8,000 per container between June 2021 and June 2022, according to Norwegian transportation data firm Xeneta.

This does not mean that shipping rates have returned to pre-pandemic levels, however. The rate of shipping a container from China to the West Coast of the US was more than four times higher in July than the rate of the same service in 2019, according to freight marketplace Freightos. One thing stopping rates from returning to their pre-pandemic levels is still the congestion in the system, primarily noticeable on U.S. rail systems.

Record Breaking Congestion in U.S. Seaports Already Preparing for Peak Shipping Season

By now it should be difficult to find someone who hasn’t heard about the issues surrounding the coastal congestion U.S. seaports are currently facing, and port officials don’t expect the congestion to alleviate any time soon. This has prompted a response from retailers and manufacturers, who have already begun importing products in preparation for the fall holiday season. The average time containers are waiting in the busiest port complex in the nation, located in Los Angeles and Long Beach Calif., was up to a 6 day wait for cargo to be moved by truck, and a 9 day wait for containers moving by rail.

Some retailers think they have recognized ways to alleviate some stressors, however. Analysts at JPMorgan Chase & Co. released a report recently that expected restocking in the home furnishings and electronics sectors to slow because of diminishing demand. The queue in the aforementioned Los Angeles and Long Beach ports shrank to 28 vessels recently, the lowest number since August of last year, down from 109 ships in January.

Freight Demand Slowing, Leaving Trucking Boom in the Dust

The increase in demand for truck drivers created by the pandemic is starting to finally slow, according to the Cass Freight Index. Rates for truckers are dropping dramatically, and the measure of domestic shipping demand only rose 0.6% in March, an unseasonably slow rate. Last-minute spot-loads, which make up a fraction of the market but lead the industry in contract rates, are pricing significantly lower as shipping demand comes back in line with available truck capacity.

Rising profits from the largest truckload carriers in the US, and an increase in consumer demand, saw a surge in rates for truckers during the pandemic, and it seems like that effect is wearing off. Transportation services are ending the first quarter behind where they were this time last year, and making their adjustments accordingly. Inflation affecting consumer trade is also cited as a key contributor to the falling trucking rates. Rates are not expected to return to their elevated pandemic levels in the near future.

Labor Disruption One of Many Potential Threats to US Supply Chain

Global Supply Chains could see even further disruption in the coming months, due in part to a potential disruption in Labor. The existing contract between West Coast longshore workers and shippers expires July 1st, and there aren’t many options remaining to shippers if those talks turn sour. To manage the potential disruptions ahead, some shippers are already moving some of their international holiday-season orders to get these products into domestic networks early, and many are diverting cargo normally routed through the West Coast to the Eastern and Gulf Ports instead.

Shippers and business-owners alike are finding this particularly concerning because the usually months long processes of negotiation have not been started, and have yet to be given a start date. The agreement represents 22,400 dockworkers in 29 ports across Washington State to Southern California. Western US Ports have seen delays because of labor negotiations as recently as 2015, when negotiations took a year to resolve.

Eastern US Ports Likely Next Supply Chain Problem Point

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According to American Shipper, the Eastern and Gulf Coast ports will see a traffic surge in the coming months. The number of Asia-East Coast services per month rose to 28 in March, with an expected 30 in May. Deployed capacity of services is projected to reach 889,000 twenty-foot equivalent units in the month of June, up 40% from the 2021 average, and 56% from 2020.

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“The shift from West Coast to East Coast ports can be attributed to congestion in said West Coast ports”, says the McCown Report. Shippers have elected to change routing directions in favor of East/Gulf ports due to their proximity to a good majority of the US population as well. The calculated three-month trailing average of year-on-year volume changes shows that East/Gulf ports were growing faster than West Coast ports even before the pandemic, and that congestion in the western ports has only accelerated East Coast traffic.

The Effects of Urbanization on the Trucking Industry

Urbanization is creating a huge disruption in the trucking industry. A lot of areas are moving towards urbanization which is increasing the accessorily of trucking of trucking companies. Due to this there has been an increase in customers that will undoubtedly help trucking companies generate more business and grow rapidly.

The growth of E-commerce has also been a huge contributor to urbanization and the pandemic is only acerated because so many people were mostly indoors. E-commerce has also contributed to people realizing the relevance of supply chain and how important it is.

US Cargo Blog

US Cargo Link has been in this industry for over 25 years and offers comprehensive logistics solutions which includes Trucking, Warehousing, Cross-docking , Freight Consolidation ,Air and Ocean Freight etc. . 3PL companies also help takeaway a huge chuck of responsibilities from companies making it easier for this companies to focus to other important tasks and also ensuring customer satisfaction.

The Growth of Last Mile Delivery

The last mile delivery market is set to grow tremendously in the next few years despite the pandemic in 2020. Many companies to improve customer satisfaction have started to adopt last mile delivery.

It is predicted that the United States is estimated to see a growth rate of 16% between 2021 and 2025.One of the primary reasons for the growth in this market is the growing B2C e-commerce industry in the US.

The Growth of Last Mile Delivery

Companies like US Cargo Link play a very important role in the last mile delivery process moving smoothly. They can manage complex partnerships as well as use cutting edge technology in the most beneficial manner.

As the complexity and competition increase, last mile players need to leverage their key strengths to provide utmost customer satisfaction and build long term relationships.

The Spread of SCaaS

Supply chain and logistics is an integral part of any business to sustain. A huge chunk of the fundamental functioning of any business depends on the smooth movement of their logistics and a strong supply chain network.

Several businesses handle their logistics activities in-house but with the demand rising and trending innovations in the world of supply chain many companies outsource their logistics activities like Packaging, Freight Consolidation etc. to third party logistics companies.

The Spread of SCAAS

The spread of Supply Chain as a Service has proven to be extremely beneficial for companies as well as their customers. Companies that have adopted supply chain as a service and have seen tremendous increase in their business. In today’s era, choosing to adopt supply chain as a service gives companies more time to focus on other major activities of their business-like customer service, sales, strategic business planning etc. Also, with the shortage and rising cost of human labor -outsourcing their logistics activities will prove to be extremely effective.

Third party logistics companies like US Cargo Link help business focus on their other major business functions by taking over the company’s logistics activities like Warehousing, Cross Docking, Transloading, Trucking etc. Not only that, but they do also more than just moving freight. They provide package tracking, smooth client communication which ensures great customer satisfaction.

It is very important for companies to keep updated and adopt to the latest trends in the industry. This will not only help enhance their productivity but also make them extremely efficient in the long run.

Influence of Ecommerce on Supply Chain Management

Ecommerce has become such a prominent part of everyone’s day to day to life in some way or the other. Ecommerce has made shopping such an easy process that a huge chunk of population depends on it for almost all their day-to-day needs.

The pandemic has been a huge contributed to accelerating the growth of ecommerce companies. Many Organizations have realized that if they don’t start adopting the digital route of selling products, they won’t be able to survive amongst the huge ecommerce giants.

Some of the main reasons why people prefer shopping online are:
❖ Less-time consuming
❖ Cost-effective
❖ Convenient

Retail Supply Chain Illustration Feature

The growing demand in the ecommerce space has made the role of supply chain very crucial. Companies can benefit in different ways by working with 3rd party logistics companies. Outsourcing a bulk of their logistics responsibilities like warehousing, transportation etc. gives a lot of space to companies to focus more on their marketing and sales.

3 PL companies not only take away a huge chunk of logistics responsibly from the company’s side but also aids in improving customer service by providing on-time delivery and great quality service.

Importance of Social Media For Ecommerce Website Owners Professional SEO Services

To conclude, the relationship between ecommerce and supply chain is very interrelated. The increasing popularity of ecommerce is resulting in an increase in demand for 3 PL companies and has also bought a lot of awareness around the importance of supply chain.

Sustainable Supply Chain Management

Post covid – there has been a huge magnitude of change that has come into the logistics and supply chain industries. Companies are looking to move freight more than ever because of the surging demand in various industries.

As we all know, supply chain and logistics connect different industries and companies making it one of the key elements for any industry to function smoothly.

With the rising demand for logistics in different industries, its high time companies adopt sustainable supply chain management. Environmental supply chain management and practices can help organizations not only reduce the total carbon footprint but also achieve profitability and greater cost savings.

Sustainable Supply Chain Management

To sum it up, some of the key reasons why companies must adapt to sustainable supply chain management are:

  • In depth research and experience has proven that over time it reduces financial costs and improves profitability.
  • Governments are recognizing companies that adopt sustainable practices and awarding them with various tax benefits.
  • Consumers have started to recognize the importance of sustainable supply chain management which is driving revenues because of the increase in sales.

To conclude, supply chain having such a large network and so many various elements -if more companies start adopting the sustainable model its benefits with the regards to the environment and the future of the world is endless.