When it comes to the global supply chain, a lot can happen in six months. Halfway through the year, the environment that was predicted back in January might bear little resemblance to what has transpired.

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Fortunately, it’s a level playing field. No one has the advantage of a crystal ball hinting at what the market will do. But that’s not to say you can’t make your own good fortune. By maintaining a constant pulse on the state of the industry, and seizing the moment to adapt or prepare accordingly, you’ll be in a far better position to thrive during the next six months—even without that crystal ball.

The Mid-Year Outlook

Halfway through 2024, the most notable factor is persistently sky-high ocean freight rates—especially in contrast with U.S. ground transportation rates, which can’t possibly go much lower.

Ocean rates are high because of limited overseas vessel capacity, forcing shippers to move to the spot market. This year, spot ocean freight rates from the Far East to the U.S. popped between 36-41% month over month, and ocean carriers increased additional charges known as general rate increases by roughly 140%. 

Currently, a 40-foot container from China to Los Angeles is over $10,000. As steamship lines maintain the right to do blank sailings—determining that they will not sail during specific times—capacity shrinks further. However, projected increases in Q4 capacity suggest a softening of rates may bring some relief in the upcoming months. Another layer of complexity, though, is threats of strike from the International Longshoremen’s Association along the East and Gulf Coast ports. With the current contract set to expire in September, a potential strike poses substantial implications on port disruptions and congestion—especially heading into peak season.

Painful memories of pandemic supply chain bottlenecks are spurring interest in nearshoring. Shippers are turning their attention away from vendors in Asia and toward those in North and South America, particularly as companies have shifted production and manufacturing to Mexico to be closer to the U.S. Nearshoring enables shippers to de-risk their supply chain, drastically reducing transit times to avoid another hit to their bottom line.

Nearshoring is particularly attractive given the current state of U.S. ground transportation rates, which have essentially bottomed out, especially on the truckload (TL) side. The less-than-truckload (LTL) side is a little higher, since there is a bit more volume being redistributed following Yellow’s bankruptcy in 2023. The LTL rate forecast for 2024 is a 1.9% increase year over year, down from 2.8% previously. Meanwhile, flatbed carriers have been locking in their trucks to contracts so that they do not have to go after broker/spot freight in the coming months.

Air transport is not showing anything of note at the moment, but it remains an area to watch given the uncertainty of ocean capacity as we approach peak season—the status of which remains largely in question. Companies are currently in a passive destocking phase, which we expect to continue, with inventory restocking starting later this year. With the uncertainty around peak, customers will be cautious on just how they restock.

Alternatively on the inventory front, fraud and theft are at the worst they have ever been. Companies are losing millions of dollars as thieves engage in everything from complex schemes impersonating drivers to basic “smash and grabs” from parked trailers. Warehouses and distribution centers are the most targeted locations for theft, with parking lots following closely behind. Electronics, food and beverage, and household goods are the most targeted commodities. With the spike in these crimes, insurance rates are likely to rise, along with fear that insurance companies will stop paying claims.

Seizing the Moment

Having your finger on the market’s pulse is only as beneficial as what you do with that information. Volatility is a pretty sure bet when it comes to your supply chain, but with the right network and strategy in place, you can be better prepared to weather it. 

With today’s abundant capacity, rate control is in the hands of shippers, but as history has shown, the market is cyclical. Instead of relaxing while the tide is high, shippers should be laying the groundwork for the next (inevitable) freight rebound. Consider the future challenges that might arise or reflect on past missed opportunities to be well-positioned for the inevitable market flip. 

Your Network

There is no time like the present to evaluate your network as it exists in the current economic environment. Has your customer base shifted? Where are your suppliers located? It’s an ideal time to evaluate how nearshoring could benefit you. 

Does the number of facilities you have accurately reflect demand? Many companies have shrunk their inventories and may not re-up on a warehouse lease or may be looking for guidance on how to get out of a building. A slower market like the current one provides that space to utilize a 3PL or consultant who can conduct network studies and determine the potential for savings. 

Your Logistics Partners

Take a look at your logistics and supply chain partners. What is the long-term strategy? Are the rates in line with your expectations? Consider partners who may have let you down during the pandemic and avoid falling into the trap of repeating history because you’re swept up in the moment. One of the biggest pitfalls companies make is to start chasing dollars when things are slow. It may be tempting to add a vendor because they offer savings, but it rarely pays off. It is also important to understand the financial standing of your key suppliers. Bankruptcies are on the rise and it is being felt especially hard in the trucking and logistics industry.

Having a strategy in place is critical to avoiding these mistakes. Adhering to a strategy doesn’t mean that you can’t adjust along the way, but it can avoid poor decisions in the heat of the moment. Be especially mindful of the vendors with whom you have established trust. They are the ones who will have your back when the market flips. The ones enticing you with a deal today will do nothing for you tomorrow. Engagement and relationships are critical, especially given the industry’s cyclical nature. Give freight when you can, so that when capacity is low, carriers can return the favor.

If you haven’t yet partnered with a 3PL, now is also a good time to consider doing so. Look for a 3PL with end-to-end solutions that can be customized to your business vertical and geography. A 3PL can bring efficiencies quicker and at a lower cost than what you could do in-house. They’ve made investments in technology and productivity so that they are always on top of the moment. As we like to say, “we’re doing the dance all the time.” They can also lead those difficult conversations to ensure you adhere to your strategy.

Your Contracts

Now that it’s a shipper’s market and capacity is high, it’s the ideal time to rebid your business and lock in rates. Carriers are hungry for volume and are more willing to renegotiate now. Even if you don’t renegotiate your contracts, it is a good idea to at least initiate discussions again. Kicking the can down the road never pays off in the long run.

The ocean market is a good example of this. A lot of companies had very high contracted rates in 2022 and in 2023. When rates started falling, most shifted to spot rates because they were so much lower than contracted rates. They were playing the savings. Many didn’t expect rates to rise as fast as they did and hadn’t read the fine print, so steamship lines had the ability to keep them stuck on the spot market.  

The moral here is: if you want to protect yourself in the long-term, get contracted and locked in.

Your Technology, Fraud Prevention and Security Measures 

When things are slow, companies are less willing to make investments. When things inevitably flip, there is ample regret around the lack of technology upgrades or resources to adequately manage your supply chain and transportation. Seize the moment. Look at the tools that help with visibility, efficiency, reporting and data. What information did you not have at your fingertips during recent challenges, like COVID-19, that you’d like to address to avoid similar shortcomings? Several years ago, everyone was too busy trying to survive to consider technology. In a moment of calm, now you can. 

Now is also the time to implement tools to protect your organization. Fraud and theft change by the day. Invest in a vendor who is on top of it and can keep you in the know. For example, look at your processes and the technology you use to qualify and contract with your carrier partners.  Fraudulent theft of motor carrier numbers is on the rise, so you need to make sure you are doing business with who you think you are, and not someone trying to impersonate them. 

In short, seize the moment now to make your future a success, whether that means reevaluating your network, finetuning your partners, securing contracts or investing in the latest technology to keep you ahead of the curve. When you think several steps ahead, you’re more prepared to handle whatever comes your way.

Author Bio

Jeff McDermott has been with GEODIS for nearly 15 years and currently serves as the Executive Vice President of Transportation for the Americas region. With more than 30 years in the logistics and supply chain industry, today Jeff oversees all transportation products for GEODIS, including transportation management, freight brokerage, drayage and port services, final mile and dedicated transportation.

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