Global Logistics: Vexing issues linger

This month we planned out an issue of LM designed to help readers better manage through this vortex that has pulled so much productivity out of our operations over the past three years. The goal is to better understand where we are in terms of global services and technology and help shippers control what they can while moving freight during this period where so many of the vexing issues ushered in by the pandemic continue to linger.

Our contributing European editor Dagmar Trepins files her annual report from her location in Denmark to bring U.S. shippers up to speed on the latest from the EU. She says that increasing energy costs, wild fluctuations in capacity supply and demand, continued port delays, inland bottlenecks, and a threat of double-digit inflation across many EU countries are themes facing every manager moving freight through Europe in early 2023.

“It’s clear that companies in every industry are analyzing their supply chains and searching for optimization tactics and alternatives,” says Trepins, who adds that many shippers she’s spoken with are planning to build up more inventory with the goal of greater stability in supply. “Still, the economy has no short-term alternative to international production and trade, and whether there will be more regionalization or nearshoring remains to be seen.”

Trepins reports that while it’s clear that global supply chain operations will need to research and implement improved risk management best practices to manage through the complexity, it’s clear that the next big challenge for all will revolve around ecological matters.

“Improved climate friendliness is now top of mind,” adds Trepins. “And it’s clear that the trend is to take every bit of CO2 reduction into account and leverage climate potential step by step wherever sensible and effective. So, we’ll be watching for shifts to low-emission modes and the further development of alternative fuels on the way to climate-neutral shipping.”

Ocean carriers are certainly looking to take the lead in the implementation of alternative fuels, as shipping on the high seas accounts for around 3% of global CO2 emissions, according to the International Council on Clean Transportation. In fact, many are using recent record profits to put more modern ships with improved environmental standards into service.

Contributing editor Karen Thuermer begins her 30,000-foot view of how these global workhorses are getting along—and it’s a mixed bag.

“The numbers are impressive for 2022,” says Thuermer. “By all counts, the biggest container lines are on course to post profits that will top 2021’s record by 73%—staggering numbers brought on by tight capacity and exceptionally high container rates. However, as they steam into 2023, worldwide recessionary and inflationary pressures are now chipping away at these fortunes.”

As Thuermer reports, the reduction in consumer demand, the number of new ships adding capacity, as well as sourcing origin shifts—many are near-shoring or re-shoring due to issues of the past few years—are the key trends leading to drastically lower ocean rates at the beginning of the year. “As far as rates go, it looks like shippers and their freight forwarder partners will be able to do a little window shopping this year,” she says.