December 2022: Supply Chain Digest
Mitigating volatility in 2023:
- After negotiations between the freight railroads and railroad labor unions failed to reach an agreement with all 12 unions, President Biden signed legislation to prevent a national rail strike on December 2nd.
- The U.S. business inventory to sales ratio is 1.33, illustrating a balance not seen since before the pandemic.
- The ILWU is holding off on setting a strike deadline as the West Coast port dockworkers continue to work without a contract.
- Container volume at U.S. ports has returned to levels seen prior to the pandemic.
- Ocean container rates have returned to pre-pandemic cost levels.
- LTL freight tonnage has been decreasing since October.
Closing out 2022:
- The Port of New York and New Jersey has displaced the Port of LAX as the busiest U.S. port. Ongoing ILWU and rail congestion are keeping importers using East Coast ports.
- Railroad unions are pushing to add additional time off with more than 70 members of
- Congress signed a letter to the President to guarantee seven days of paid sick leave for railroad workers.
- Walmart is rolling out its DroneUp service in Arizona, Florida and Texas. The DroneUp service will deliver over 10,000 items up to 10 pounds for a delivery fee of $3.99. The service area is within one mile of each store.
- Key indicators: CPI 6% less food & energy; U.S. inflation rate 7.1%; Unemployment rate 4.2%;
Looking forward to 2023 with a look back at 2022:
- Mergers & Acquisitions continued at a fast pace with companies broadening their base of services and operations.
- Rail congestion was and still is a major obstacle for the west coast ports. Choke points create issues upstream and drive importers to direct load to the East Coast ports.
- Offshoring labor by logistics firms to support back office and direct operations continue to become a larger piece of the labor expense for logistics companies.
- Infrastructure expansion at the U.S. ports will continue into 2023 and beyond as ports look to increase their throughput and attract import & export business.
- Demand planning has become the number one issue that manufacturers are looking to solve.
- The pandemic has placed risk mitigation in the supply chain as the leading initiative in 2023, as companies turn toward normalcy and look at tightening down their supplier base through nearshoring and sourcing closer to their markets.
- Sustainability became a key driving force in 2022 as companies looked beyond the pandemic and focused efforts on reducing costs and streamlining processes. Sustainability efforts will be centered on technology supporting the capture of data points in meeting the reporting requirements of larger corporations.
- Business intelligence and the analytics that bring the supply chain to life have proven once again data is king. 2022 prioritized the need for deeper analytics and the requirement to view and analyze the data for continuous improvement.
- Visibility continues to be driven into the supply chain with added technology and third parties that deliver a single point of data transfer for shippers seeking complete visibility of their shipment transit.
ROCKFARM One View
It appears we may be headed into a level of normalcy as our Rockfarm truckload index cost per mile levels out heading through the last couple weeks of the year. In review, the rate level has averaged between $2.82 and $2.84 since October. This average takes into account the wild swings on the cost of fuel with November hitting $5.25 on the DOE average and decreasing to $4.86 midway through December, the lowest level since February of this year.
Inventory levels have risen throughout 2022 with the reported sales-to-inventory ratio announced at 1.33 by YCharts. This is the highest level of inventory since February 2021. Rising inventory levels have initiated a rapid decline in ocean container prices.
As reported by Statista, global ocean container rates have declined from an average of $10,361 in September of 2021 to a low of $2,404 in November. The sharp decline in ocean rates is driven by increased inventory levels as predictive inventory turns become more of the norm that we saw in 2018. Given the challenges over the past couple of years, 2023 is shaping up to become a year in which we can all get back to the basics of executing our business models and improving our operations.
Work With the Experts
For more information please reach out to our Supply Chain Coach team.
FOR MORE INFORMATION, PLEASE REACH OUT TO INFO@ROCKFARM.COM.
By Brad Stewart
Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena. As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.
“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”
Statista 2022. (2022 November). Global container freight rate index from January 2019 to November 2022
YCHARTS. (December 2022). US Business Inventory/Sales Ratio
Wikipedia. (2022 November). 2022 United States railroad labor dispute
Maiden, Todd. (2022 December). LTL tonnage declines accelerate in November
Ronan, Dan. (2022 December). Ports Close Out Year of Change; Infrastructure on Tap in 2023
Supply Chain Brain. (December 2022). Railroad Workers Pressure Congress and Biden to Address Working Conditions
Garland, Max. (2022 December). Walmart drone delivery service launches in Arizona, Florida and Texas