Two things are certain these days for an 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.
As witnessed with the recent Hanjin bankruptcy and NYK/ MOL/ K Line 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.
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.
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:
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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