As most people expected, 2022 has been another volatile year for container shipping. The relaxing of COVID-19 lockdowns drove a major shift in consumer spending from physical goods back to services. This triggered a buildup in inventories and a consequent drop in demand for container shipping, which in turn allowed the carrier networks to untangle, thereby adding capacity to a market now clearly in excess supply. This is the classic supply chain bullwhip effect, and no doubt we’ll see more of the bullwhip in 2023.
In preparation for 2023, we know that supply chain professionals are contemplating new procurement strategies as they evaluate the tradeoffs between cutting costs and managing their supply chain risks. Carrier executives continue to explore new contract products as a means to better position their services in light of unpredictable demand and volatile prices. Similarly, non-vessel-operating common carriers (NVOs) are optimizing their contract mixes to enable more active margin management in a lower freight rate market.
As the innovation in contract products continues, the need increases for technology to manage these contracts and the underlying performance. At NYSHEX, we are now providing technology to support all contract types, from two-way committed contracts with strict financial penalties, to contracts where there may be no consequences for not performing. Regardless of the contract type, technology provides accurate and timely data to enable faster and better decisions; reduces workload and creates efficiencies; and allows carriers, shippers, and NVOs to work together based on a shared system of record. Fortunately, these features create mutual value for shippers, carriers, and NVOs, regardless of where freight rates might end up in 2023.