The latest Colliers Supply Chain Solutions Report highlights significant developments and trends impacting the logistics and supply chain industry in the first quarter of 2024. This comprehensive overview includes crucial updates on port operations, potential labor strikes, freight pricing, air cargo trends and supply chain optimization strategies.
Port of Baltimore: Back in operation
The Port of Baltimore is set to fully resume operations following the removal of the containership Dali from the Francis Scott Key Bridge. With the U.S. Coast Guard and the Army Corps of Engineers overseeing the efforts, the port is now fully operational. This development significantly boosted the region’s commerce and logistics flow.
Potential rail strike in Canada
A potential rail strike in Canada could disrupt the North American supply chain. Teamsters Canada, representing over 9,000 workers, has indicated possible strikes at Canadian National Railway and Canadian Pacific Kansas City. The ongoing negotiations over safety provisions and work schedules remain unresolved, posing a risk of significant disruptions if an agreement is not reached.
Air Cargo trends
European retailers and manufacturers increasingly use air cargo to avoid the conflict-ridden Suez Canal and the lengthy ocean voyage around Cape Town. This shift has led to a 71% increase in air cargo spot rates from the Middle East and Southeast Asia to Europe compared to the previous year. Additionally, global air cargo tonnage kilometers rose by 11.9% in February 2024 compared to February 2023, indicating a significant uptick in air freight activity.
Port statistics and freight rates
The report shows a 15% increase in TEUs (20-foot equivalent units) handled by the top nine ports in Q1 2024 compared to Q1 2023, driven primarily by increased import volumes from China. Notably, the Ports of Los Angeles and Long Beach experienced the highest growth, with 30% and 16% increases, respectively. Despite a 20% decrease in ocean container rates since their peak in January 2024, they remain significantly higher than pre-pandemic levels, influenced by the Panama Canal drought and Red Sea military conflicts.
Freight pricing trends
The logistics industry is witnessing varied freight pricing trends across different modes:
- Truckload rates: A surplus in fleet capacity has led to a reduction in truckload rates.
- Ocean freight rates: Despite a 20% decrease since January 2024, rates are still 122% above pre-pandemic levels.
- Air freight rates: Air cargo rates have seen a marginal increase of 0.1% since February 2024.
- Intermodal and drayage rates: Intermodal rates decreased by 5.7%, and drayage rates have generally declined across major ports.
Labor and wage trends
Wages and salaries in the U.S. have increased by 1.1% since December 2023, with regional variations. The average wage rate for a Warehouse Associate II has slightly increased in some areas while remaining flat or decreasing in others. Warehouse employment has stabilized, showing a 0.5% increase from December 2023 to April 2024, indicating a steady demand for skilled labor in the logistics sector.
Supply chain network optimization
The report emphasizes the importance of supply chain network optimization, an analytical exercise to determine the optimal count, size, and locations for warehouses, distribution centers, or manufacturing facilities. Key principles for effective optimization include:
- Strategy before structure: Understanding the business from both strategic and operating perspectives.
- Total cost consideration: Evaluating network design based on total costs, including freight, labor, facility rent, and inventory carrying costs.
- Cost and service optimization: Balancing service levels and cost minimization for optimal network design.
Conclusion
The Colliers Supply Chain Solutions Report for June 2024 provides valuable insights into the current state of the logistics and supply chain industry. The report outlines the critical factors shaping the industry, from port operations and labor disputes to freight pricing and supply chain optimization. Businesses must navigate these developments strategically to ensure resilience and efficiency in their supply chain operations.
Colliers is a leading diversified professional services and investment management company. For more than 29 years, our experienced leadership with significant inside ownership has delivered compound annual investment returns of approximately 20% for shareholders.
Brewster Smith, senior vice president and leader of Colliers’ Supply Chain Services within Occupier Services, specializes in OPEX reduction and service improvement. With 26 years of experience, he has helped clients identify and/or achieve $500 million in logistics related cost savings. His expertise includes network optimization, transportation modeling, inventory targeting, distribution center operations, 3PL sourcing, technology sourcing and disaster recovery planning.
Derrick Yim, vice president and solutions delivery lead of Colliers Supply Chain Services specializes in client solution delivery, including supply chain network optimization and site selection, distribution center design, transportation strategy, inventory optimization, robotics/automation assessments and more.
