The vitality of American consumerism continues unabated as we enter 2022, and Americans continue to increase their consumption of goods at the expense of services spending.
Against this backdrop, collective international supply chain infrastructure capacity — including ships, port terminals, railroads, drayage, chassis, warehouses, trucks, and drivers — has reached unprecedented industrial utilization levels. This surge of demand collided with a mostly capped short-term supply, snarling supply chains and resulting in bottlenecks and congestion across the US.
Previous disruptive events, such as the 2014–15 West Coast longshore labor negotiations and Hanjin Shipping’s bankruptcy in 2016, are a reminder that it will take significant time and effort to bring the supply chain ecosystem back into balance.
The last two years have reaffirmed the need for shippers to have a robust, data-driven procurement strategy backstopped by strong analytics. Building flexibility and optionality into the freight procurement process is of the utmost importance, as is securing strong partner relationships that can adapt to changing tactical conditions.
While we cannot predict what the next challenge will be, we can be sure there will indeed be a next challenge to face.
Carrier selection and annual contract renewals go well beyond simply contacting providers for rate quotes. Service degradation and price volatility have increased as the liner industry moves away from a long period of chronic overcapacity.
To thrive in this environment, shippers require a sound, data-driven procurement strategy designed around strong partners and optionality. Stronger forecasting tools and processes will be needed to ensure that carrier partners are aligned to provide the required capacity and service levels.
Shippers that successfully navigate the procurement process will be able to turn adverse market conditions and disruptions from a business inhibitor into a sustainable competitive advantage.