The supply chain crisis persists, and shipping and logistics remain in flux. With capacity at a premium, carriers currently hold pricing power, but that could quickly change. The only certainty in logistics is that uncertainty will grow, opening the door to innovative and adaptable companies to emerge as industry leaders.
Businesses are doing everything they can to get product to customers and generate revenue. Following are some of the latest trends fueling growth across the supply chain.
Spot market surge. Shipping remains a people business, and loyalty is important. But in a time of destabilized supply chains, ability becomes prized over loyalty. If you’re able to effectively manage freight and get it to its destination, you’re hired.
The trend has caused in surge in ocean-freight pricing in the spot market. According to the Wall Street Journal, spot rates to ship a 40-foot container from Los Angeles to Shanghai rose 75% between December 2020 and December 2021.
Currently many carriers are foregoing long term contracts, which provide less flexibility for shippers in an ever-changing market. And this spot market surge doesn’t appear to be going away anytime soon. S&P Global is already reporting as much as 100% price increases for shipping container rates year over year, as early shipping contract discussions for 2022-2023 begin. The end result is an increase in prices for consumers.
More intermodal freight. Intermodal services are on the rise. According to the January 1 rail traffic report from the Association of American Railroads, 2021 was the “second best intermodal year ever” behind 2018. Additionally, the first half of 2021 set records for intermodal freighting, before taking a sharp dip in the second half.
Last-mile innovation. As the pandemic persists, consumers will keep shopping from home, with higher expectations of delivery to the doorstep. According to a study from Transparency Market Research, the last-mile industry is expected to hit a valuation of $477.7 billion by 2031.
At the same time they strive to meet consumer demands for efficient and reliable delivery, carriers are required to meet intensified environmental, social and governance (ESG) standards. Amazon.com Inc. and FedEx Corp. are among the major players that are shifting their delivery fleets to electric power. Amazon recently made a deal with Stellantis to buy an undisclosed number of electric delivery vans by 2023. FedEx recently received its first shipment of what will eventually be a fleet of 500 EV trucks from GM.
Innovation in the last-mile delivery landscape will continue. Emerging technologies such as self-driving delivery vehicles and drones will continue to attract investment in the near future, bringing about the next wave of evolution in transportation services.
Over the past two years, supply chain obstacles caused by the pandemic have spurred innovation in delivery services. Despite all of the frustrations they’ve encountered over that time, transportation providers will ultimately profit from the push for new ways to boost efficiency and keep goods moving.
Zeke Ziliak is global vice president of transportation and logistics industries at PROS.
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