Facing a noticeable increase in parcel volumes, the United States Postal Service saw a significant drop in on-time delivery rates YoY during the 2023 holiday season. The news was a blow to Postmaster General Louis DeJoy, whose ten-year plan, “Delivering for America,” aims to optimize efficiency and on-time delivery rates.
But that’s not the only roadblock facing logistics professionals: the cascading effects of the Red Sea disruption continue to raise rates across the containerized transportation sector, and the ongoing drought in the Panama Canal is forcing major carriers to make difficult decisions. In an industry that’s always moving, here’s what you need to know.
During the holiday season, the United States Postal Service saw a significant drop in its on-time delivery rates year-over-year. In 2022, the USPS achieved an on-time delivery rate of 90.1% for first-class mail. In 2023, however, that number dropped to 85.4%, which experts attribute to the closures of multiple delivery suppliers and service centers during the first quarter of FY 2024, which ran from Oct. 1 to Dec. 29, 2023.
“Operational disruptions within our network, including insourcing of several Surface Transfer Centers after a supplier bankruptcy, and the extended shutdown of a critical St. Louis, MO processing facility due to a mercury leak from an illegally shipped package resulting in a lengthy decontamination period, have and will continue to negatively impact our service performance scores,” according to a USPS press release.
Importers are continuing to see a steep rise in container rates as the crisis in the Red Sea makes its mark on the global supply chain. The global average cost to ship a 40ft container has nearly doubled since the crisis began. In the week of Jan. 4, the spot market cost of shipping a container from China to the Netherlands reached $3,577, a staggering 115% increase from the previous week.
“What every shipper is trying to figure out is if the current proposals are in line with the carrier’s added costs, and not simply a move to offset softer rates in other lanes or raise rates across the board,” Colin Yankee, Chief Supply Chain Officer of retailer Tractor Supply, said in an interview with The Wall Street Journal.
On Jan. 12, a Delaware bankruptcy court approved the sale of 23 of Yellow’s service centers. Yellow, which declared bankruptcy in July of 2023, has now seen the Delaware court liquidate approximately half its former assets in a previous sale of terminals and service centers.
According to a FreightWaves article, the court is pursuing a separate liquidation of Yellow’s 12,000 tractors and 35,000 trailers through various auction houses.
December air cargo rose notably, an increase industry analysts attribute to holiday demand. The uptick — a 9% increase YoY, with the average spot rate per kilogram increasing from $2.45 in November to $2.60 in December — comes as welcome news to air cargo carriers, who have struggled to cope with stubbornly low volumes in 2023.
In conversation with Supply Chain Dive, Niall Van de Wouw, Chief Airfreight Officer at Xeneta, expressed that recent industry disruptions may contribute to a continued rise in air cargo rates: “If big ocean carriers are not going through the Red Sea, it might delay a million or more containers, with all the knock-on effects. And the fact that you don’t know how long this situation will continue means some shippers will pay for the predictability of air cargo to lessen the impact of the current ocean freight disruption.”
The U.S. military, along with the military of Great Britain, has launched a series of reprisal strikes against Houthi forces in Yemen. The attacks come as retaliation in the wake of continued Houthi strikes upon vessels transiting the Red Sea. As of Jan. 12, the U.S. military reports that 60 targets in 28 locations have been hit in the reprisal attacks, according to Reuters.
“These targeted strikes are a clear message that the United States and our partners will not tolerate attacks on our personnel or allow hostile actors to imperil freedom of navigation,” U.S. President Joe Biden said.
As stubbornly low water levels and drought conditions force Panama Canal officials to limit the number of vessels allowed through the canal, maritime carrier A.P. Moller Maersk has announced plans to circumvent the canal using freight railroad services. Rather than using the canal, Maersk’s Oceania-Americas (OC1) service, which connects ports in Oceania to ports on the U.S. East Coast, will shift containers to the Panama Canal Railway, which runs adjacent to the canal.
“Pacific vessels will turn at the Port of Balboa in Panama, dropping off cargo heading for Latin America and North America, and picking up cargo heading for Australia and New Zealand,” Maersk officials said in a Jan. 11 press release. “Atlantic vessels will turn at Panama’s Port of Manzanillo, dropping off cargo heading for Australia and New Zealand and picking up cargo heading for Latin and North America.”
U.S. inflation increased by 3.4% YoY in December, creating a setback in the U.S. Federal Reserve’s continued battle against inflation. Federal Reserve officials had hoped to limit inflation to 2% and have recently ended a historic streak of consecutive interest rate hikes designed to decrease the inflation rate.
The resurgence in inflationary growth has continued to place pressure on consumers. Car insurance prices increased 20% YoY in December, and rent prices swelled 6.5% YoY, according to a BBC report.
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Shippers are preparing for the worst as a hard time gets harder for legacy carriers. Here's what you need to know in an industry that’s always moving.