Four areas we see impacting global supply chains the most include the ocean carrier market, air cargo market, cyber security, and trade agreements.
The ocean carrier market has seen many changes in the last few years. Most notably, ocean carrier alliances are going from four to three and the top 20 carriers will soon number 12.
Even with approximately 7 percent growth in global container volumes in the third quarter of 2017, carriers are continually looking for ways to better manage capacity. We are seeing carriers change from being price-driven to more space-driven. Since we are a non-vessel-operating common carrier, ocean carriers are wanting us to commit to a certain allocation of space, which requires us to ask our customer for better forecasting. The forecasting information allows us to go upstream in our customers’ supply chain, which helps us secure space with carriers based on customers’ requested delivery dates, and better manage volatility.
On the air cargo side, capacity became very tight at the end of 2017 with double-digit, year-over-year growth. This appears to be driven by the continued expansion of e-commerce, specifically in the high-tech industry. The increased use of air freight is having a rippling effect on our customers in automotive, retail, and apparel that need product urgently for their assembly lines or for the holiday season. Ongoing communication between our origin and destination teams and with customers helps us quickly identify other options and avoid delays.
The evolving use of technology has the potential to help all players in the global supply chain with increased communication, real-time updates, and overall visibility. However, with the increased use of technology, we can expect more cyber security issues impacting companies’ supply chain. There should be a balance to ensure security and minimal disruption, while utilizing relevant technology to remain competitive.
Global trade agreements have been in the news a tremendous amount in the last 12 months. The current US administration had a fundamental change in the direction of US trade policy. The withdrawal from the Trans-Pacific Partnership, the ongoing North American Free Trade Agreement negotiation, and other trade agreements up in the air leave uncertainty in the global trade arena. This has led to many US-based companies considering near-shoring, specifically in Mexico. Companies should review options based on total landed cost, the regulatory environment, and required speed-to-market to select the best location for their business operations.