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New trends in logistics

New trends in logistics - Route Newsletter: January 2024

International carriers involved in ocean, air, rail as well as truck freight are rapidly launching new services and tweaking their networks amid evolving global trade flows.  This is in response to manufacturers investing billions to build factories that are closer to consumers or in geographic locations with less political risk in a push for increased supply chain resiliency after weathering years of political and pandemic-related disruptions.

These trends — known as reshoring, nearshoring and friend-shoring — may cost shippers in the near term, but they stand to benefit from faster lead times and greater diversity in their distribution strategies as a result.  Improved capabilities and network tweaks from major carriers aim to capitalize on this geographic shift in demand.  Examples range across transportation modes, from cross-border services connecting Mexico, the U.S. and Canada, to new shipping routes out of Latin America.

As these logistics offerings improve, more factory ground-breakings are poised to follow.  Across the board, companies identify logistics as the most important factor when deciding where to source materials from and make direct investments.

Ocean carriers have adapted to shifts in global trade demand for years.  During the 2008 financial crisis, the industry faced a sudden drop in demand, and shipping companies responded by reducing capacity and implementing cost-saving measures.  Similarly, when the Panama Canal expanded in 2016, it altered trade routes and required substantial investments in infrastructure to accommodate larger vessels.  In some cases, decreasing demand has led to the closure or downsizing of specific lines, while the emergence of new or expanding markets has allowed carriers to introduce new lines and trades.

Air cargo is also eager to capitalize on these new trends, focusing on the fact that nearshoring or friend-shoring a supply chain is not a straightforward endeavor.  For example, manufacturers that move operations from China to Mexico may still be relying on materials from suppliers in Asia or other sourcing locations.  That is where air cargo services come in handy.  During a nearshoring transition period, shippers will often use air freight to quickly deliver supplier components to keep up with their new facilities’ production and inventory needs.

While shippers are diversifying their supply chains to mitigate risks, agility is critical as disruption is truly unavoidable, and shippers historically turn to air to keep goods moving.  Many businesses will be eager to tap into less expensive transportation modes like trucking or rail once that transition is complete, but air freight still offers upside for operations closer to their customers.  For example, air cargo has been a quick, reliable pivot for many automotive suppliers and OEMs to zip past congestion along the U.S.-Mexico border.

Finally, there has also been a pronounced development in intermodal services out of Mexico, as these news trends in supply chain unfold.  Railroads and trucking companies are ramping up partnerships to capture demand from North American supply chain investments and the U.S.-Mexico-Canada Agreement (USMCA), tapping into each other’s networks to offer comprehensive services between the three countries.

For more information, contact David Lychek, Director – Ocean & Air Services.

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