Despite carrier hopes, peak season 2023 is starting to look like a bust. Recent inventory corrections have caused carrier volumes to stagnate, frustrating carriers and highlighting hopes for volume normalization in 2023. Schneider National CFO Steve Brufett recently told FreightWaves that volumes are moving sideways without a usual seasonal uptick and that his company is accepting most loads tendered to it daily compared to only a 50% acceptance rate a year ago.
Despite carrier hopes of volume normalization as the market contracts in 2023, FreightWaves warns, “2023 is likely to be another year of sub-replacement level builds due to parts and components shortages as well as Europe’s struggles with sourcing energy to power vendor manufacturing site.”
YoY Volume Lapses Worry Air Cargo Companies
A step away from a normal holiday peak season, air cargo volumes and rates have continued to fall. Citing Clive Data Services, Supply Chain Dive wrote that airfreight demand fell for the eighth consecutive month in October. Volumes declined 8% YoY in October, and as of Nov. 2, levels remain 3% lower than in 2019. Despite falling 20% YoY in October, spot rates are still 94% higher than in 2019.
While demand remains high, the lack of volume points to a troubling lack of peak season increases for an air cargo industry already struggling with volatile fuel prices. As Niall van de Wouw, Chief Air Freight Officer at Xeneta, told Supply Chain Dive, “We are six weeks away from Christmas, and there is no indication there will be a peak.”
Experts Predict Lower Congestion, Labor Woes for 2023
On Nov. 9, Supply Chain Dive published the thoughts of four ocean shipping industry leaders in response to the question, “What should ocean shippers expect this peak season?”
For shippers eager for conditions to continue stabilizing post-COVID, Carmit Glik, CEO and Founding Member of Ship4wd, says, “We are witnessing a decline in ocean rates for all trades, especially in the West Coast of the U.S. where port congestion has eased. This is a clear indication that we are returning to a pre-COVID-19 environment that will benefit importers, exporters, and the end consumer.”
However, a decline in demand doesn’t necessarily mean smooth sailing, as Spencer Shute, principal consultant at Proxima, warns, “Ongoing supply chain discussions are now centered around strike threats and tightening capacity.”
Outpacing Competition, DHL Announces 7.9% Rate Hike
In a Nov. 4 press release, DHL announced plans to raise rates for U.S. account holders by 7.9%. Prices are adjusted on an annual basis by DHL Express, taking into consideration inflation and currency dynamics as well as administrative costs related to regulatory and security measures.
While DHL shifts the blame to U.S. inflation, the 7.9% rate hike far outpaces the 6.9% average rate increases of its closest competitors, UPS and FedEx. In addition general rate increase, DHL will increase prices for many services and surcharges.
U.S. Postal Service Takes Different Approach to Rate Hikes
On Nov. 10, the U.S. Postal Service proposed its rate changes for 2023.
However, unlike competitors FedEx, UPS, and DHL, the USPS won’t increase rates across all shipment types. Instead, it will raise rates on a shipment class that faces relatively little competition: first class and priority services. FreightWaves reported USPS proposed the following rate increases:
- 7.8% for First Class Package Service (applies to parcels weighing less than 1 pound)
- 6.6% for Priority Express Mail (Next-day delivery service)
- 5.5% for Priority Mail (2- or 3-day delivery service)
While this balanced approach to rate hikes is likely to siphon traffic from FedEx and UPS, logistics experts will have to wait to see if the strategy is suitable for a cash-strapped USPS.
Amazon Introduces Designs for a New Delivery Drone
In another step toward alternative delivery methods, eCommerce giant Amazon recently unveiled the design for its new delivery drone. The MK30 drone, set to come into service in 2024, is lighter and smaller than its predecessor, the MK27-2, which will begin operating later this year in Lockeford, California, and College Station, Texas.
In a Nov. 10 announcement, Amazon stated, “Our drones can encounter new, unexpected situations and still make safe decisions—autonomously and safely. We’ve created a sophisticated and industry-leading sense-and-avoid system that will allow our drones to operate at greater distances while safely and reliably avoiding other aircraft, people, pets, and obstacles.”
By implementing drone shipping in some parts of their service areas, Amazon hopes to optimize shipping and improve delivery speed. However, whether regulators will allow drone fleets to take to the skies is still being determined.
Tough Times for Turkeys Cause Thanksgiving Price Hike
In a tricky turn of events for turkey lovers and Thanksgiving fans, Wells Fargo, citing statistics from the Bureau of Labor and Statistics, has released a report stating that turkey, a Thanksgiving staple, will cost U.S. consumers a whopping 23% more than in 2021.
While supply chain pressures and inflation undoubtedly factor in, Supply Chain Dive reports that disease is the primary culprit in the poultry price hike. Roughly 2.5% of the annual turkey population was wiped out by the avian influenza outbreak, meaning fewer turkeys will be available than on a typical Thanksgiving.
Managing Freight & Parcel Spend is No Holiday Walk in the Park
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