The 2:00 Minute Warning

In last week’s Two Minute Warning we discussed CSCMP’s outstanding "Annual State of Logistics" report. One of the key points it highlighted was the sea of uncertainty that shippers have experienced for the last couple years shows no signs of abetting. What does that mean for you as a shipper?
 
The report highlighted that if you want to be proactive and have some freedom about what your company can do, you need to be aware of potential key issues, plan for a variety of potential outcomes, and be ready to adjust if conditions change. You must anticipate the challenges your supply chain could face and be prepared to respond appropriately to avoid service issues and increased costs.
 
Over the years, we have worked with customers on scenario planning exercises. As part of this process we will often compile a list of the different things that could affect your company’s supply chain. Right now, some of the things that should be towards the top of your list of “things that can affect my supply chain” include the following:
 
First is the potential for a strike at the East Coast Ports when the contract between the International Longshoremen’s Association (ILA) and the terminal operators expires at the end of September. This is a major concern for ocean shippers as the contract negotiations have deteriorated. In one of our earlier Two Minute Warnings we talked about the letter from Harold Daggett who heads the ILA. It was extremely contentious and led to media coverage around the increased possibility of a strike. We’re watching what will happen with a request from shippers who have asked the Biden administration to get involved to help mitigate the strike possibility.
 
The second thing we’re watching is rates in the ocean markets. We’ve seen reports from financial analysts highlighting how much they’ve risen with shippers now paying rates that have risen by 200% - 300% over the past three months. And rates may continue to go higher even though there's commentary in publications that some carriers are bringing on additional capacity and rates may go down. 
 
Shippers need to look at the fact that there is capacity being consumed by significant congestion in ports like Singapore and Shanghai, along with longer routes from the Red Sea situation. Eventually, all those containers that are being held up at those ports will begin to arrive here in North America. And when that happens, shippers may well find that delivery times and service levels have deteriorated and their overall landed costs will rise.
 
The third thing we’re watching is the continued softness in the truckload market. Having talked with several carrier CEOs about where the market is headed, I learned something interesting: With all the uncertainty in the markets, they all want to get out of the prediction business! Many CEOs and financial analysts thought truckload rates would be rising by the end of the second or certainly, in the third quarter, they would be able to raise rates. That has yet to happen. Now they’re pushing rate increases out to the fourth quarter of 2024 and potentially into 2025. Even though the number of carrier bankruptcies, or carriers choosing to shut down their operations is increasing, there continues to be too much capacity.
 
What can you do about all this? Well, for starters, does your company have a list of “things that can affect my supply chain”? Here at TranzAct, we can help you create, or revise that list so that you can be proactive in addressing these issues and protect your supply chain and costs. Our Supply Chain Rapid Assessment has proven to be very effective in helping companies develop a holistic view of what’s happening in their supply chain and identify how different issues could adversely affect their operations and increase costs.

If you’re interested in learning more, let’s have a conversation. It won’t cost you a dime and it may save you hundreds of thousands of dollars, or more. Simply give me a call at 630-530-6190, send me an email, or schedule a meeting with me via Calendly.
 
Last but not least, have a great fourth of July!

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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