With peak shipping season just around the corner, the logistics industry is looking forward to a smoother supply chain than previous years have provided. However, transportation management experts caution logistics providers not to get too excited. As inflation slogs on and a potential recession lurks around the corner, logistics providers have little choice but to cross their fingers and wait to see what peak season brings.
Spencer Patton, founder and President of overland logistics provider Patton Logistics, has made a new call for FedEx to renegotiate pre-existing contracts–like those with Patton Logistics–in light of unprecedented inflation. Speaking at a recent event in Las Vegas, Patton said, "This business model is hurting to a degree where my company individually has to see change from FedEx Ground," according to reporting from SupplyChainDive. If FedEx fails to adjust the terms of his contract to account for higher operational costs, Patton has threatened to shut down his 225 overland routes on November 25th of this year, leaving FedEx without coverage starting on Black Friday and likely going them in a challenging position facing a busy peak season.
As the logistics industry reexamines capacity challenges ahead of the 2022 holiday shipping season, SupplyChainDive gathered a group of transportation experts to discuss how shippers should prepare for a potentially tough peak season. While Dean Maciuba, a Managing Partner for Crossroads Parcel Consulting, was quoted as saying, "In general, I look for a manageable holiday shipping season this December, with a slowing economy limiting ecommerce growth, which supports less unplanned volume for all the carriers," others were not so optimistic. Discussing the ongoing shortages and supply chain issues troubling the global logistics network, Ju Myung Song, an Assistant Professor of Operations and Information Systems at the University of Massachusetts Lowell, said, "Many experts expect these supply chain problems to continue through 2022 when uncertainty remains as COVID-19 cases rise again. So the shortage will continue, but for some sellers, the problem will be too much inventory."
Despite billion-dollar order cancellations from mega-retailers like Walmart and Target, U.S. container imports are near record-setting. SupplyChainDive, in their recent analysis of a 2022 study by logistics provider Descartes, reported that, "U.S. imports totaled 2.53 million twenty-foot equivalent units in July. That's up 3% year on year and 15% from July 2019, pre-pandemic. It was the best July on record, with volumes up 2% sequentially from June. This July marked the fifth-highest monthly volume ever recorded by Descartes." Although, at the same time, industry experts are pleased to see that high inflation has had little effect on container imports, some worry that the U.S. port capacity is close to maxing out, potentially forcing ports to invest in costly construction projects.
As the U.P.S. continues to explore cost-cutting measures, the cash-strapped agency is searching for savings hiding behind its vast logistics budget. Having spent nearly $10 billion transporting letters and packages in 2021, the U.P.S. is working to overhaul its extensive network of trucks, planes, trains, and ships–beginning with its relationships with the freight brokers that supply their transportation channels. According to an August 25th, 2022 report from FreightWaves, "The Postal Service has already ditched thousands of carriers as it's streamlined operations, according to longtime parcel expert Satish Jindel. In 2014, the Postal Service worked with about 4,000 highway contractors. Now that's around 1,700." With a busy peak season around the corner, U.P.S.'s new strategy is sure to be tested by a high demand for fast, reliable delivery among American shippers.
In a recent interview with FreightWaves, Jim Meil, current ACT Research Principal, former VP, and Chief Economist for power management firm Eaton Corporation, rated the chance of a severe recession rocking the U.S. Economy at 20-25%. Speaking in Columbus, Ind., following an ACT Research Seminar, Eaton said of the chances of a strong recession, "It could arise from seeing another oil price shock. All it takes is a few errant missiles over the Persian Gulf […] Now we're not talking about $120 [a barrel] oil or $150 oil. Now we're back to saying $180 oil and not $6 or $7 or $8 fuel in California but $10 fuel across the country." Despite these strong warnings, Meil later reiterated that a catastrophic recession remains an unlikely scenario. "We do have a very strong labor market. And that is one of the foundations for this thought that it's a mild recession," said Meil, "We've raised interest rates but we didn't have to go through what the Fed did 45 years ago in 1978 and 1979. There's real resilience out there, but it's always possible to have the black swan happen."
Colonial Freight Systems, a self-described "100% owner-operator company", has revealed that the company will be shutting down by the end of August. Founded in 1943, Colonial Freight System has remained family-owned throughout its history and has been helmed since 2014 by Ruby McBride. As for Colonial's fleet of delivery vehicles, FreightWaves reports, "Alabama-based PS Logistics announced that subsidiary Purdy Brothers Trucking had acquired 50 tractors and 55 lease purchase drivers from Colonial and Phoenix. Before the transaction, Colonial had 250 power units and 260 drivers, according to the Federal Motor Carrier Safety Administration database."
Although the Pharmaceutical supply chain had its issues pre-pandemic, COVID-19 exposed the gravity of the situation. By over-reliance on other countries–such as China and India–for the life-saving medications needed by patients throughout the country, the U.S. has found itself facing ongoing and significant shortages of vital medicines. According to a recent report in the Harvard Business Review, written by Eric Edwards of public benefit pharmaceutical corporation Phlow, the solution lies in reimagining the pharmaceutical supply chain. "By changing the supply chain so it includes a domestic stockpile of key essential medicine ingredients and advanced manufacturing processes," Edwards writes, "we can ensure the nation is never again short of critical essential medicines."
While many U.S. industries have been eager to implement automation, the $803 billion grocery industry has been reluctant to embrace mechanized innovations. Writing in SupplyChainDive, retail-grocery expert Sam Silverstein notes a fundamental disconnect between the technology driving sales and the infrastructure used to fulfill orders within the American grocery stores: "...automated micro-fulfillment centers remain a rarity in the grocery space, with retailers still heavily reliant on human workers to gather products for digital customers manually." However, as post-pandemic customers expect greater automation, the grocery industry will likely be forced to adjust to new consumer expectations–though whether grocers will adapt remains to be seen.
Economic trends will come and go, and contractual snafus are to be expected–but with Intelligent Audit, your business can face a volatile peak season with confidence. So start a conversation with Intelligent Audit today, and access the freight auditing and recovery, logistics network optimization, business intelligence, machine learning anomaly detection, and on-hand advisory services your business needs to face today's unpredictable logistics industry head-on.
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