With a worldwide vaccine distribution effort underway, the global pandemic still impacting most regions of the world, and supply chain disruptions persisting, the transportation environment remained unpredictable as we moved into 2021. These uncertainties may continue at least through the first half of the year, with shippers feeling the impacts across most modes.
Regardless of specific mode, the warehousing and distribution environment appears to be a common issue for many freight operators right now. In its recent Outlook 2021, JOC describes how this persistent labor shortage—particularly for warehousing and distribution—combined with social distancing requirements is slowing supply chain and logistics activities.
“What began as a surprising, ferocious consumer and personal protective equipment (PPE)-led cargo surge this spring had collided head-on with the operational realities of a raging pandemic,” JOC adds. “For shippers, the impact on cargo flows was only worsening as 2020 came to a close.”
Tracking Trucking Activity
In another JOC outlook article, William B. Cassidy discusses the U.S. trucking market, noting that COVID-19 fundamentally altered consumer demand in a way that worked in truckload carriers’ favor. “Unable to spend money on services during the COVID-19 pandemic, US consumers have put a much larger slice of their spending into durable and non-durable goods,” he writes.
As a result, the freight markets have remained strong. This has naturally created a supply-and-demand structure that favors carriers and finds shippers paying higher rates (and not always getting the lanes or carriers that they wanted).
On a favorable note, JOC predicts that this market tightness may ease if a spike in new truck orders brings more tractors to the road. Other relief points may include more truck drivers returning to work and/or the movement of more freight away from the spot market and back to contract carriers as shippers accept higher rates.
“Carriers will also need to stabilize their transportation networks in 2021 to make the most of existing capacity,” Cassidy writes, “but that stability seems farther away, not closer, as the number of US COVID-19 cases climbs rapidly.”
Ocean and Air Trends
In What an Unpredictable Year Means for Freight Costs in 2021, supply chain consultant Avinash Mishra says that the disruptions caused by the pandemic will have a “lasting impact” on the ocean shipping industry, where shipping delays and container shortages are becoming more common.
These issues have led to port congestion right at a time when the world’s major manufacturing hubs have started gearing back up for business in 2021. To offset these and other challenges, Mishra says shippers should be assessing their logistics processes and adding capabilities that allow them to better track their cargo, optimize their inventory, reduce human errors, and scale up and down as needed. These steps can help companies get a better picture of their current and future transportation needs, and also reduce transportation costs.
“Shippers need to collaborate with shipping lines/3PLs for blocking space with committed volumes and to achieve this, they must be able to perform more accurate transportation forecasting,” Mishra writes, adding that companies should also be leveraging digital technologies (e.g., transportation forecasting) that allows them to interpret customer demand patterns by specific lanes, locations, modes, and/or products.
With the vaccine ramping up for mass production and distribution, companies should also know that air cargo capacity will be consumed by vaccine movements plus urgent cargo, thus resulting in more costly and unpredictable rates in 2021.
Executive Vice President and Head of DB Schenker’s Americas Airfreight, Asok Kumar says that airfreight capacity currently remains at about 57% of the total market (including freighters) and about 18% less than what it was in early-March 2020. “That in itself then creates issues and problems for shippers,” says Kumar, “and drives them to find logistics solutions providers to help them navigate these challenges.”
Addressing the Challenges
In 7 Supply Chain Trends to Watch in 2021, Manufacturing.net highlights the value of staying flexible and agile during these uncertain times. Doing so not only helps companies respond quickly to changes in their transportation plans, but it also helps to shield them from the impacts of “surprise” events they may not have been ready for.
“With agility, companies can prove they can cope with natural disasters or pandemics,” Manufacturing.net points out. “An agile supply chain can also help you navigate scarcity and disruption. Supply chain managers can predict and identify potential problems and solutions, [and then] respond to disruptions in production, supply, and delivery more swiftly.”
Finally, if there’s one thing all companies learned in 2020, it’s that you can’t do it all, and that experienced logistics providers can help organizations navigate the complexities and interruptions of the current freight market. The right partner can also help alleviate the stress of having to manage multifaceted supply chains and allow you focus on what you do best: running your successful business.