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The falling freight rates we witnessed in late 2022 signaled a slow start for shippers in the new year. As the market returns to pre-pandemic levels, shippers are seeing lower volumes than at any point in recent years.
For evidence, look to the Drewry Worldwide Container Index (WCI), which found that the average price of shipping a 40-foot container at the beginning of November last year went to its lowest in two years at $2,773. The average rate from Shanghai to LA significantly dropped from $11,197 to $2,262 from January to November.
As the new year gets off to a sluggish start, shippers are turning to data analytics in logistics to optimize their supply chain operations. By digging into the root causes of the freight slowdown, shippers can better understand how to leverage logistics analytics in a challenging new year.
The fears of a U.S. recession may be unwarranted as the economy grows, spending continues, and employment is steady. GDP quarterly changes showed 2.6 percent growth in the third quarter of 2022, and the forecast for Q4 2022 and all quarters of 2023 show growth. However, the picture is different for the freight economy. The positives for the economy will not necessarily boost the freight market, which is true for a few reasons.
Low imports entering the U.S. mean shippers don’t see the same demand they’ve seen in recent years. This slowdown is forcing shippers to reevaluate operations toward the goal of doing more with less.
The National Retail Federation (NRF) forecasted declines for 2023 related to imports. It expects January 2023 TEU to be down about 5 percent compared to 2022, which would be comparable to January 2021 levels.
There are numerous reasons for reduced imports. Factors impacting this area include:
While the real GDP may look good, it’s not the same for the goods transport part of GDP, which showed contraction last year that many expect will continue through 2023’s first quarter. It has been a continuous pattern over numerous quarters. While many hope to see growth in Q2 through Q4, it will likely be slower than real GDP.
Consumer patterns shift over time. During the pandemic, for example, consumers spent less on services and more on goods. They were understandably spending less on vacation, recreation, and eating out, while spending on other areas went up. There was an 18 percent increase in recreational goods and vehicles, including gym equipment.
However, as the pandemic and its effects fade, shippers are returning to their pre-COVID spending habits, which means they’re going back to spending more on services and less on goods. Also, after experiencing high inventory-to-sales ratios in most of 2022, retailers started getting ahead of expected consumption reductions in the later part of the year by reducing new inventory in advance.
So, while the past couple of years has required extensive supply chain capacity to transport goods from manufacturers to hubs to end-customers, the current spending on services does not need the same. It’s time for shippers to adapt to this shift within a dynamic logistics marketplace.
As conditions change related to consumer spending, imports, and other factors, shippers need to adapt to a different logistics environment than we saw in previous years. Data analytics provides a helpful tool that allows shippers to be more aware and ready for changes in a volatile logistics industry.
Under current market conditions, shippers must find a way to accomplish more with less. Automated data collection processes provide one way for shippers to do this. They can use automation to eliminate time-consuming data collection that is outdated, inefficient, and prone to mistakes. Automation helps shippers make faster decisions to build a more efficient supply chain.
Raw data is unwieldy and unusable. With the right team and tools to use the data properly, it is helpful. However, when used properly, it provides a wealth of information that can inform important strategies. Automated logistics analytics easily turns raw data into actionable insights, so it’s not a problem to collect and use the data well. Automated data collection creates faster data processing and increases accuracy while reducing costs and freeing staffing resources to focus on customer service and other business-critical tasks.
Shippers can automatically track important data on shipments, costs, supplier performance, delivery processes, and other markers, bringing together the data to better understand logistics operations. Shippers can use this data to gain insights and make decisions that improve efficiency throughout the supply chain. For example, they may be able to carry out strategies like mode switching, consolidating, and refining hub injection strategies based on analytics.
Shippers are learning the importance of real-time visibility as the supply chain transforms to meet the realities of a new market. With real-time visibility data, shippers can better understand their assets’ precise location and see previously invisible operations to create more supply chain optimization.
Freight visibility is essential to improving logistics, as it provides more information on every part of the process. Better visibility allows shippers to gain a more complete picture of where freight is at all times from point A to point B, the performance of each carrier in the process, when and why anomalies occur in the process, and so on.
Through the right technology, shippers can gain this information in real-time, so they are always on top of logistics processes, respond proactively to problems, and improve customer communication and service. Logistics analytics allows shippers to properly use the information they gather for complete, real-time, and ground-level visibility. They can turn the data into insights for decisions. For example, they may find a way to respond better and faster to an anomaly by quickly catching it and understanding all sides of the issue. Furthermore, the insights garnered from improved visibility analytics can easily be shared with supply chain partners. This enhanced communication ensures that shippers facing a harsh reality can better collaborate to optimize operations easily.
While shippers know that analytics can benefit them as they adapt to a slow start in 2023, they might not all have the team and tools to collect data and turn it into usable analytics that can inform decisions. This is where technology comes in, as software can provide data analytics in logistics and supply chain management. By offering the analytics advantage through a simple, easy-to-use dashboard, logistics analytics software makes accessing actionable insights easier than ever.
Intelligent Audit’s software provides shippers with a range of benefits from its dashboard.
The dashboard shares an abundance of information and insights that enable shippers to manage costs, make real-time decisions, plan, identify issues with carriers, and optimize logistics processes.
This new year shows shippers a slowdown in freight, mainly caused by reduced imports and a shift in U.S. consumer habits to include more services and fewer goods. Retailers created a head-start on the slowdown by building their inventory ahead of time, creating less need for buying later.
As shippers face these challenges and slowdowns, they need a way to adapt and gain control. Logistics analytics through Intelligent Audit provides shippers with the ground-level operational understanding they need to maintain flexibility in a dynamic supply chain marketplace.
Gain better insight and understanding to help you adapt to early 2023 and beyond. Start a conversation with Intelligent Audit today.
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