As the logistics industry continues to recover from pandemic-era supply chain disruptions, shippers are adjusting quickly to the expectations of a new normal. Falling ocean rates and volatile fuel costs have logistics professionals across the supply chain searching for innovative efficiency solutions throughout their operations. With peak season approaching in a dynamic logistics industry, here is a weekly roundup of news and trends shaping global supply chains.
In preparation for peak season, FedEx President Raj Subramaniam is taking measures to ensure FedEx's contractors are ready for the challenge ahead. In a Sept. 22 earnings call, Subramaniam said FedEx Ground had signed 96% of its 6,000 contractors onto a peak season incentive program, which leaves the company "well-positioned" to deliver for the holidays. That impressive sign-on rate, significantly higher than in previous years, demonstrates large-scale buy-in among contractors. FedEx neglected to specify the amount of package volume covered under the 4% of contractors who have decided not to join FedEx's incentive program.
Blank sailing (skipping a particular port or voyage) has been a flexible solution to many problems for ocean carriers. As tensions within the supply chain begin to relax, shippers increasingly leverage blank sailings to prepare for lessening demands. For example, carriers plan to reduce the capacity for the Asia-to-North America West Coast trade lanes by as much as 29% in the weeks following China's Golden week in early October. As freight rates continue to fall, shippers will likely continue to leverage blank sailings to balance operational costs against volatile fuel prices.
As Postmaster General Louis DeJoy struggles to find sure financial footing for the U.S. Postal Service, he's also looking toward the future. While competing with FedEx and UPS remains a distant goal, DeJoy told Supply Chain Dive that becoming cost-effective, reliable, and very affordable are the main goals. He does not want to conquer the delivery market; he simply wants the USPS to serve as a leader in a competitive delivery marketplace.
As shippers across the logistics industry struggle to bring efficiency to their operations, Class I railroads have succeeded in simplifying service. Trains, the Magazine of Railroading, reports that the four major Class I railroads have hauled nearly 160,000 fewer trailers in 2022, down 20% year over year." As Class I railroad service efficiency improves, trailer-on-flat car service is quickly becoming obsolete.
Facing difficulty in the trans-Pacific market, industry-leading shipping giant Maersk has announced it's dropped two trans-pacific services. FreightWaves, reporting on Maersk's decision to drop trans-Pacific lines, wrote that Maersk CEO Soren Skou "voiced no concerns about Maersk and kept earnings guidance unchanged. However, his comments on sinking demand implied that carriers with less contract coverage and land-based logistics business than Maersk have something to worry about." With spot rates continuing to fall, it remains unknown whether Maersk will continue to reduce service in its trans-Pacific operations.
As the capacity crisis continues, carriers increasingly turn to expanded modalities to increase service opportunities. Last week, ocean carrier MSC joined Maersk and CMA CGM in announcing the development of an MSC air cargo service. The freighter service, operated by Atlas Air, will launch in early 2023 following the delivery of four Boeing 777-200F planes. With air cargo service, MSC hopes to expand operations into key lanes and various industries that typically require multimodal transportation.
DHL, a leading global shipping and logistics provider, is investing further in an existing partnership with Massachusetts-based Locus Robotics. With plans to expand fulfillment automation services into two of DHL's Ohio warehouses, the partnership demonstrates a growing trend in a logistics industry beset by consistent labor shortages and uncertainty. The two companies say this technology will help control operating and labor costs, as well as boost DHL's production capacity at the sites heading into peak season.
Climate Group, a global nonprofit dedicated to driving climate action, announced last week that five multinational companies have committed to bold sustainability initiatives in OECD markets. "Ikea, Unilever, A.P. Moller — Maersk, JSW Steel Limited, and GeoPost/DPDgroup have signed onto EV100+, a pledge to phase out their highest polluting vehicles. The group has committed to eliminating zero-emissions fleets in their medium- and heavy-duty transport divisions. Though this may seem like a relatively minor action, it sets a standard for other corporations. "Medium- and heavy-duty trucks account for about 4% of all vehicles on the world's roads, but they account for 40% of all road transport emissions and one-third of total transport fuel use," according to the Climate Group.
According to Jack Kleinhenz, the U.S. fresh produce industry is returning to pre-pandemic employment and wage levels. His Texas-based market research firm produced the first comprehensive study of the entire fresh produce and floral supply chain. However, the report also found that the fresh produce and flowers sector, which has recovered more slowly than other sectors within the national food supply chain, is continuing to hold back the broader food supply chain.
Food Ingredients First noted that "while the sector is gradually returning to its pre-COVID-19 employment and wages levels, it is still delayed in its reform — which is forecasted to continue to weigh down the national food chain."
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