Volatility Continues to Define International Logistics

Two things are certain these days for international logistics manager: volatility of price capacity, and complexity across the supply chain.

Gone are the days of predictability stability: you could argue today’s logistics manager must develop the additional skill sets of a stock market floor trader and supply chain risk manager in order to keep freight moving globally.

As logistics managers build their 2017 international transportation strategy, there are some high level trends to consider.

Key International Logistics Trends for 2017:

1. Restructuring & Realignment of Capacity
As witnessed with the recent Hanjin bankruptcy and Nippon Yusen/Mitsui O.S.K. Lines merger, international ocean capacity is in a state of flux. 4th Quarter 2016 has seen an increasing trend of rolled bookings as carriers adjust to change. With more carrier alliance shifts expected soon, capacity concerns are front and center as logistics professionals look ahead to 2017 transportation planning.

What Shippers Can Do: when access to reliable, consistent capacity is an issue, Flexibility is key. Shippers who maintain a diverse mix of direct carrier contracts and NVO agreements limit exposure to major price swings, avoid rolled bookings, and keep cargo moving through their supply chain.

2. Strengthening Retail Sales
Unlike last year, 2016 holiday retail forecasts are strong. The National Retail Federation (NRF) is predicting 3.6% growth in holiday sales over 2015, driven by strong gains in jobs and housing. Deloitte also predicts a strong 4th quarter in their most recent retail holiday survey. Once-cautious retailers have ramped up orders to meet sales forecasts, while the continued growth of e-commerce puts further pressure on logistics operations to deliver within a shortened supply chain cycle.

What Shippers Can Do: Speed to shelf is top of mind, and being able to improve logistics efficiency within tighter delivery cycles is a competitive advantage, especially in retail. International Logistics Visibility - and we don’t mean basic arrival date tracking & tracing - allows logistics managers to keep supply chain execution tight. Visibility is achieved when technology and people are aligned across all stages: sales, procurement, sourcing, logistics, distribution - all the way through to the retail shelf.

3PL providers play an important role in this alignment through technology enablement, granting shippers real-time access to logistics information, inside market knowledge to help predict and avoid potential supply chain risk, and proactive communication to ensure high levels of service with each shipment.

3. Ocean Container Price Volatility
Staying on top of ocean transportation pricing has been an arduous task for logistics managers. This graphic depicts the dramatic swings we’ve seen in the market over the past 18 months:

18 month sampling of international ocean container rates from Shanghai to US West Coast, US East Coast, and Chicago (via Tacoma)

Source: 18 month average market rate sampling - actual container rates from Top 15 Global Ocean Forwarder

Thus far in Q3 and Q4 2016 we’ve seen General Rate Increases (GRI) and Peak Season Surcharges (PSS) announced on the 1st and 15th of each month. The net effect: unlike Q4 of 2015, rates are steadily on the rise - in some cases 50-100% higher than they were earlier this year.

New and dramatic changes to carrier alliances, continued infrastructure & labor situations within ports, potential impacts from changes to NAFTA and/or the enactment of the Trans-Pacific Trade Agreement - all of these things will keep the state of international logistics in constant flux.

Looking ahead to 2017, it is important for logistics managers to consider their supply chain strategy, logistics infrastructure and provider relationships, and risk mitigation in the face of increasing complexity.

 

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White Paper & eBook Resources

International Transportation: Price Matters, But At What Cost?
This ebook is a comprehensive guide to international transportation, that will help logistics managers better evaluate and plan their; supply chain strategy, logistics infrastructure, and risk mitigation strategy. Download Now!

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Keeping Up with the Retail Consumer
6 supply chain disciplines retailers must master - developed by Adrian Gonzalez, founder and president of Adelante SCM and LEGACY Supply Chain Services, with foreword from Rick Blasgen, president and CEO, CSCMP. Download Now!

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