Analyst Insight:Resilience has been a main theme since the pandemic revealed risk in supply chains that weren’t properly diversified, leaving them vulnerable to disruption and delays. While many shippers have made great strides toward building resilience into their supply chains over the years, it’s important that they don’t pump the brakes on progress made thus far, especially as we’re in a new year with new challenges.
Following are a few market trends that global shippers should keep in mind as they continue to focus on resiliency and diversification.
A changing logistics landscape.While disruptions aren’t new, this year’s risks could present more unique challenges. Take labor strikes, which have significantly increased around the globe. In the U.S. alone, strikes almost tripled in number in 2023 compared with the prior year, according to a study by Cornell University. As additional labor contracts expire, those organizations could follow suit, elongating the negotiation period and disruption.
As geopolitical tensions increase, we’re seeing more international trade changes than ever before, including stricter regulations on forced labor and new trade measures controlling exports and imports. It’s vital that shippers stay up to date or have a trusted trade partner to help them remain compliant, as things can change quickly, especially when shipping to and from multiple countries.
Additionally, trends such as reshoring and nearshoring are contributing to the changing logistics landscape, and that’s unlikely to slow down. According to a survey by Accenture, over the next three years, 78% of companies plan to use multiple sites to produce products, compared to just 41% in 2023.
A return to more traditional shipping patterns.Some pre-pandemic shipping cycles and patterns are returning. However, shippers shouldn’t expect a more balanced supply and demand forecast across all global transportation services or lanes. This is due in part to the oversupply of capacity that was introduced starting in 2020. Fast forward two years, and demand significantly decreased, but capacity was still readily available on most global trade lanes.
Throughout 2024, we may see supply and demand become more balanced in the air market due to the ending of third-party charter agreements, which would remove some excess capacity. On the ocean side, however, new ships will still be entering the market through 2024, so it’s unlikely that demand will increase enough to absorb the additional capacity before the second half of the year at the earliest.
Creation of more sustainable supply chains.Many businesses have been working toward more sustainable supply chains for years, but increasing regulations from the European Union at the beginning of the year have elevated this topic.
As of January 1, carriers shipping to or from the European Economic Area (EEA) were subject to the EU’s new Emission Trading System (ETS) regulations, which were expanded to include maritime shipping. While it’s still early, the new requirements could lead to schedule adjustments, surcharge revisions or other changes to meet sustainability goals. EU importers are also responsible for reporting carbon emissions from the production of certain products under the newer Carbon Border Adjustment Mechanism law.
The EU isn’t the only region driving change. A knowledgeable logistics provider works with you to develop strategies for meeting sustainability goals, as new regulations enter the market.
Outlook: These themes are just part of what’s shaping the global logistics landscape. As disruptions and risks go hand in hand with global shipping, a continued focus on resiliency and diversification will be key in 2024 and beyond.
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