Faced with economic uncertainties, transportation industry leaders are focused on building supply chain resiliency. For some, like parcel giants FedEx and UPS, this means deviating from standard practices; for others, resiliency means an increased reliance on innovative financing and data collection strategies. No matter which way you look at it, 2023 is off to a challenging start for much of the transportation industry. In the industry that's always moving, here are the 11 headlines you need to know.
In a concession to the realities of weakening demand for parcel shipping, delivery giant FedEx has announced plans to further cut Sunday delivery service. The reductions, which are set to take place in March of this year, will dramatically reduce Sunday delivery services, leaving roughly half of the country’s population with access to Sunday delivery services.
In a recent statement, FedEx said, “This adjustment will enable FedEx Ground to boost efficiencies while maintaining a competitive advantage in weekend coverage,” according to Supply Chain Dive. FedEx will retain Sunday delivery services in several densely populated markets, and plans on using Sunday delivery to meet future demand increases.
On Jan. 9, Teamsters General President Sean O’Brien and General Secretary-Treasurer Fred Zuckerman met with leadership from dozens of UPS local unions to discuss the proposals the Teamsters plan to take into consideration as they prepare to begin negotiations with UPS.
During the meeting of the UPS National Screening Committee, O’Brien again reminded UPS of the seriousness of the upcoming negotiations, emphasizing to UPS that “… a contract must be agreed to no later Aug. 1, the day after the current pact expires. If not, the union will strike,” according to reporting from FreightWaves.
In a recent notice sent out to customers, UPS announced that peak season demand surcharges will be maintained into the foreseeable future, although adjusted to a lower cost per package. The surcharges primarily target packages that require additional handling, as well as large packages.
In an interview with Logistics Management, Jerry Hempstead, President of Hempstead Consulting, said that the UPS decision to maintain surcharges beyond peak season is representative of a larger trend within the parcel shipping industry: “They are now part of a revenue addiction that was fed by unchallenged increases announced by each carrier and the competitor upping the ante,” said Hempstead, “Because there was so much demand from the marketplace and really only two choices, shippers are forced to pay the price to service their orders.”
In late 2022, Chinese officials decided to pull a U-turn on their “zero-COVID” strategy. The strategy, which had been met with harsh criticism and widespread protests from the Chinese populace, had aimed to prevent mass infections of COVID-19 from slowing China’s booming economy.
A short while later, and shippers are beginning to worry about the effect of the Chinese government's sudden policy shift. According to the World Health Organization, cases in the country rose by a staggering 67% between Dec. 19 and Dec. 26. For shippers dependent on China’s busy manufacturing center, these rising case numbers are causing significant anxiety. “The pressure can be pretty tight,” said Renaud Anjoran in an interview with Supply Chain Dive. “And then suddenly you have not only (some) 40% of the operators that are down, but also maybe the production manager, the GM, everybody gets sick.”
In 2021, the supply chain financing market grew by a staggering 38%, according to The Wall Street Journal. Supply chain financing, a financing strategy in which large companies use their good credit standing to receive funding from financial institutions to cover retail orders, has garnered attention in recent months as the Financial Accounting and Standards Board moves to regulate the practice.
As more retailers turn to supply chain financing, experts are warning that the trend could have a deleterious effect upon growing businesses: “If you’re a wee company and a multinational is demanding a payment term stretching to 180 days, there’s not much you can do to fight that,” said Rachel Premack, Editorial Director at FreightWaves, “You can of course get paid in a shorter time frame than 180 with supply chain financing, but there’s a penalty as a vendor.”
The National Retail Federation’s Port Tracker, which evaluates key port data, shows that the low import volumes of late 2022 are continuing into the new year. The tracker estimates that January 2023 will see only 1.91 TEU entering the nation’s ports, an 11.5% decrease from 2022.
However, as Jonathan Gold, Vice President for Supply Chain and Customs Policy at the National Retail Foundation, points out in a statement obtained by Logistics Management, it’s not all bad news for U.S. logistics companies: “Ports have been stretched to their limits and beyond but are getting a break as consumer demand moderates amid continued inflation and high interest rates,” said Gold, “Consumers are still spending and volumes remain high, but we’re not seeing the congestion at the docks and ships waiting to unload that were widespread this time a year ago.”
Following a tumultuous few years for the global supply chain, Canada, the United States, and Mexico have taken new steps to ensure supply chain resilience between the three powerhouse trading partners. According to a White House Fact Sheet released following the 2023 North American Leaders Summit, the countries aim to:
The leaders hope that these plans will allow North American nations to build more resilient supply chains, especially as relationships with key semiconductor-producing nations become increasingly strained by global conflicts.
As the atmospheric river making headlines across the country continues to inundate Californian communities, lemon growers are increasingly concerned about what record-breaking rainfall means for their storage capabilities this winter.
Despite concerns about the effects of flooding on storage conditions, industry experts remain optimistic about California’s lemon industry: “We expect to see the usual retail focus during winter as citrus takes more of the merchandising spotlight,” says John Carter, Vice President of Global Sales at Limoneira, in an interview with Fresh Plaza, “Foodservice has been steady and expects demand to move higher as we get into spring with warmer weather and Lent beginning.”
The increasing likelihood of a recession has consumers searching for safer credit card options. “With financial uncertainties ahead, many consumers will look for credit cards offering cash back, attractive balance transfer terms or an introductory 0% annual percentage rate of 12 months or more,” writes Ryan Smith in a Jan. 6 post on The Points Guy, “Moreover, we may see a renewed interest in secured credit cards — which may be tied to the next trend we see on the horizon.”
As economic uncertainty threatens the global retail industry, many retailers are turning to improved data processes to better understand and target potential clientele. Writing in Supply Chain Brain, technology expert Phil Barry recommends retailers streamline data processes now to prepare for difficulties ahead: “In 2023, clean data — that is, data that’s complete, de-duplicated, and accurate – will become an absolute necessity,” says Barry, “As consumers grow increasingly selective about where and how they shop, it will be critical for retailers to draw on clean data that will help target customers accurately. Ultimately, clean data will provide the highest quality information to guide decision-making.”
According to a new study from tech consultancy Accenture, 76% of semiconductor executives expect the supply chain challenges facing the semiconductor industry to be resolved by 2024.
Despite this optimism, experts warn that a new set of challenges is set to make life difficult for the semiconductor industry in the coming years, according to Syed Alam, global lead of Accenture’s High Tech industry practice : “As the demand for chips slows down amid inflationary concerns and an easing of the chip shortage, semiconductor businesses face a new set of challenges driven by geopolitics and a growing talent shortage,” said Alam. “To succeed, companies need to balance being resilient in tough times with continued investments in innovation.”
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For shippers to cut costs, they must get more visibility into their freight spend using technology to uncover ways to optimize transportation management.
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