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After emerging from the global pandemic, the logistics industry is facing new challenges. The year 2022 couldn’t outperform 2019 for the logistics companies and trucking industry. As a result, there is a big fall in freight demand in December 2022.
Currently, the Outbound Tender Volume Index (OTVI) and Contract Load Accepted Volumes (CLAV) have decreased. On an average, the OTVI fell by 2.7% on a week-over-week w/w basis and 27.6% on a y/y basis. And CLAV has witnessed a dip of 2.7% w/w and 14.8% y/y.
In December 2022, Ocean Imports also faced the highest contraction in its history. In addition, shippers are giving fewer contracts to carriers, which is affecting the truckload volume negatively.
At the time of the Lunar New Year, the absence of an increase in domestic manufacturing will further deteriorate truck volumes into 2023.
Disruption in the global supply chain and port congestions are the current issues for the trucking industry and shippers of all sizes. But small business bookkeeping services have been trying to help this industry. Let’s find about the most common challenges the logistics industry can face in 2023:
As per OTRI, the rejection rate has been below 4 percent since late November. The tender rejections index tells the percentage of contracted loads rejected by trucking companies. A declining rejection rate reflects that carriers (the trucking industry) are losing the pricing power.
With no major incentives left for a carrier, it makes no difference whether a trucking company rejects 4-in-100 contracted loads versus 6-in-100. Out of 135 total markets, only 35 reported weekly increases in tender volume. All this is due to the downfall in freight demand.
If the current situation of rejection rates holds through the first quarter of 2023, shippers will have the advantage. It gives shippers a chance to secure carrier capacity at cheap rates. Moreover, suppliers/shippers are taking control of their supply chain by moving truckload fleets in-house.
Small-scale carriers and brokerages are suffering the most from the downturn of the supply chain. This leaves them vulnerable to acquisitions in 2023. Large carriers are acquiring smaller carriers, and 3PLs are merging with 3PLs. In simple words, a trend of “cross-pollination” is booming.
However, the results of these mergers and acquisitions are uncertain, especially if the deals close during an industry recession. One of the major considerations of such deals is earnings and growth potential in 2023.
Digitization in the logistics and trucking industry is expected to increase in 2023. This will allow companies to mine data for valuable insights and to accelerate intelligent decision-making. So, in the coming year, data analytics and intelligence will be two of the biggest challenges for shippers.
In 2023, the rise in digitization will keep soaring. It’ll become even faster and more advance. This is why trucking companies and shippers need to update their skills and freight accounting management to beat the competition in 2023.
With more people getting aware of the impact of diesel or petrol on the environment, demand for sustainable vehicles is increasing. Consumer pressure to bring down pollution motivates the logistics industry to reconfigure and invest in green infrastructure and electric fleets. This trend is expected to continue in the coming year.
According to a report by Descartes, there is a 12% down in imports m/m and 19.4% y/y. Imports typically declined in November 2022 as compared to October 2022.
A decrease in exports from China is the main reason behind lower US port numbers. The U.S. imports from China dropped by 11.1% in November 2022 versus October. In addition to China, import source declines were widespread, pointing more toward weakening demand.
According to Descartes’s data, there is a 30.8% m/m drop in imports from Thailand and a 17.4% drop in Vietnam. Imports also fell from countries like Taiwan, Germany, Hong Kong, Italy, South Korea, and India.
Various sources have published about the US import data, including Descartes, PIERS, the McCown Report, Panjiva, Port Tracker and more. Each of them comes up with different percentages of totals and changes. Some use customs data, while others use port counts. The McCown Report covers the top 10 ports. The NRF covers 12. Descartes, PIERS and Panjiva cover all ports.
According to Descartes, the fall in countrywide imports since the peak has been heavily weighted toward West Coast ports. Also, the import volumes in California fell 15.4% m/m in Long Beach, 14.5% in Oakland, and 7% in Los Angeles. There is also a decline in the East and Gulf Coast ports.
Not all ports are experiencing a decline in shipping. Some ports in the US are handling more shipping. Let’s take a look:
GPA Executive Director Griff Lynch said that the Port of Savannah is the second-busiest port in the month of October 2022. He further said that customers were continuously bringing new business to the Port of Savannah that links Savannah to major US markets. One hundred sixty importers (new or existing) grew their Savannah trade by 20% or more. This port continues to outperform irrespective of the recession time or downfall in demands.
The monthly crude oil export also increased at the Port of Corpus Christi on Texas’s Gulf Coast in October 2022. This growth resulted from the huge export of US-produced crude oil to Western European buyers who rejected the Russian crude imports.
Also, it is estimated that additional tonnage records have been achieved this year in renewable energy components like windmills through the Port of Corpus Christi.
Trucking and logistics industries are expected to grow by hundreds of billion dollars by 2027. Despite promising growth, some issues of 2022, such as inflation and supply chain disruptions, will impose many challenges for the logistics industry in 2023.
However, the new year also brings new opportunities in the supply chain. Because businesses will shift from reactive to proactive and from survival mode to growth mode. In this phase, tax resolution services California can support businesses in this industry.
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