Paul Ferguson – Sales and Marketing Director
As we approach the end of Q1 2023, the world of global logistics remains uncertain. Looking back the last two years have been unprecedented for the supply chain industry, and the challenges faced have had a massive knock-on effect on cargo owners trying to navigate the unchartered waters.
With little notice during the pandemic, the freight rates reached record highs while service reliability reached record lows.
For the UK & EU, Asia Westbound jumped in price by over 1000%, while schedule reliability dropped as low as 20% of vessels arriving on time with the average round trip time going from 60 days to over 100 days.
With such uncertainty trying to plan and manage stock control became virtually impossible.
Chuck in the Suez Canal incident, driver shortages and a massive lack of empty equipment in the right places following covid, and the invasion of Ukraine by Russian forces, we have experienced a perfect storm of global events, resulting in supply chain chaos across the board. Explaining the issues to anyone outside of the industry or not directly involved with moving products brought some looks of disbelief, to say the least.
Yet as we moved into the 4th QTR of 2022 there were signs the tide was turning as demand softened as consumers were faced and continue to be faced with record inflation levels and the rising cost of living.
Consumer demand has reduced and the volume of cargo moving and the demand for space on vessels has followed suit.
Freight rate levels thankfully have decreased almost as sharply as they rose at the back end of 2020, and now on the majority of trades they are back to pre-COVID levels, an unbelievable shift from where we were.
Service reliability is now better at 50% but is still someway off pre-pandemic levels where carriers reported figures of 80+%. Void sailings and port omissions are the general response to slowing demand as carriers look to soak up excess capacity and stop the rates from dropping further, but of course, this has an adverse effect on schedule integrity and impact planning.
Most are now looking at the more traditional peak season moving into the second half of the year for a potential uplift in demand. However, with carrier order books at record highs with new tonnage due in from the end of 2023 going into 2024, it may be some time before carriers are able to warrant any significant rate increase without looking at first pulling vessels altogether or restructuring their networks to allow for the slow down.
In terms of order books CMA CGM, Hapag, and MSC have nearly 3 million TEU on order or in production and other carriers have followed suit following record-breaking profits giving them the ability to invest in the newest technologies in terms of new builds and efficiencies they can bring.
In terms of port operations, in line with other industrial action, we have seen in the UK from, Doctors, Nurses, Paramedics, teachers, and train drivers, the shipping industry has been impacted by port strikes at both Felixstowe and Liverpool as well as action taken by border force and now the national clearance hub taking further action on the 15th March.
Whilst some industries have seen a slowdown we continue to see many businesses pushing for increased collaboration within their supply chains, especially around sustainability, technology, and efficiency.
Businesses are looking to reduce time-heavy manual processes, for example, ditching the older excel based practices in favour of automation and EDI & API Connectivity. This approach has allowed us to develop more strategic and meaningful relationships, more than just facilitating the movement of cargo but becoming integrated within our client’s businesses.
Our advisors are now very much seen as an extension of our clients own shipping and logistics departments, as we focus on digital innovation and consultative solutions to help them achieve their business objectives.
Sustainability and ethical practice continue to gather momentum and we support clients with their own initiatives as well as working to refine our own ESG processes and practices.
CO2 calculations and carbon offsetting are common discussions within our client meetings, especially now they are faced with global environmental targets for 2030 and then 2050 in terms of net zero.
At Good Logistics we are in the final stages of developing a new carbon offsetting product for our clients, which will be launched in QTR 2. If calculating your CO2 emissions and looking for ways to offset it, is high on your business agenda, register your interest here.
In summary, 2023 for many industries is a year to reset, with the second half of the year expected to see an increase in demand as businesses complete destocking exercises, clearing out expensive stock, before starting a reordering cycle with an eye on 2024 and the economic predictions of reduced inflation, falling costs and rising consumer confidence.
Download a copy of our Q1 quarterly roundup here