FALL 2024

142 THE DISTRIBUTOR’S

142 THE DISTRIBUTOR’S LINK CHRIS DONNELL THE STRAINS OF GLOBAL SUPPLY CHAIN from page 106 Its also important to know that when our ports suffer through periods of congestion, it puts strains on our national rail network, our truckers and equipment, and can increase costs to importers and exporters alike. Congestion also hits our local businesses such as warehousing. Over the road drivers as importers amend their routings and incorporate trans-loading into their supply line in order to keep its cargo moving. My last topic regarding ocean transport industry centers around rates. Rates for the past 3 months have bounced around. Import costs are still up around 45% compared to where they were in April. It’s safe to assume should all of the above-mentioned issues not happen, that the rates will continue to jockey up and down for the next 6-8 weeks. Should any of the above situations happen, it’s a sure thing rates will climb, the unknown is by how much. Someone recently asked me if we would see the rate levels we saw during the pandemic return. My answer was and continues to be, yes, if the above happens. One thing the ocean carriers learned during the pandemic was that importers and exporters will pay. During May, June and July we saw rates get close to those during the pandemic. Should the above happen I think it’s absolutely yes, we could see those rate levels return. Air Market And Terminal Labor Currently the air market is volatile, however, this issue centers around weather. We’ve had a turbulent weather season throughout the Pacific Rim causing delays, airport closures, and flight groundings, all of which have contributed to the growing levels of congestion. The airlines are actively working to rebound but it takes time. Places like Narita, Shanghai, Hong Kong and Seoul are all reporting issues with congestion but over the past couple weeks we are seeing a positive reduction in stationary cargo at these locations. Rates are still rising and falling on a weekly basis and the airlines are preparing for capacity increases as we move through the Peak Season. One issue that seems to be ripe for escalation is congestion at our nation’s busiest airports. Reports of truckers being delayed past their normally allocated free time of 2 hours is becoming common, and this is costing importers dearly. One other issue that seems to be raising its ugly head is the threat of strikes by airline terminals employees, pilots and other personnel. One that would be critical and is having an impact on a current issue is the threat of strike from the employees of Air Canada, one of Canada’s largest airlines. These negotiations are weighing heavily on the minds of the union rail negotiations, per leaders of the rail union, any submission or substitution in negotiations will negatively impact the airline and its employees while having a negative impact on future union labor negotiations. While the air market is going through its usual yearly growth pattern for this time of year, should things turn south in the ocean market, you can bet the airlines will be there to capitalize on the situation. Rates will increase, capacity will decrease, and overall, it could become another chaotic chapter in the global supply chain sector. Trucking, Intermodal And Over The Road Troubles It’s a rocky time to be in the rail and trucking industries. Let’s lead off with the rail industry who’s seeing their own issues. Equipment shortages are contributing to the congestion levels seen in Tacoma and Seattle. The rail lines are struggling to get capacity and enough equipment where it’s sorely needed. Just at the port of Tacoma, it’s estimated that there are roughly 3000 Chicago bound containers sitting idle. When you look at that figure it doesn’t seem to be that high, but when you take into account that the average train holds around 150 containers, that figure seems grows and the figure is growing daily. What does this mean for those smaller, more regional rail hubs and their ability to move their cargo? Then you factor in the potential rail strike in Canada and the situation looks a lot worse. CONTINUED ON PAGE 143

THE DISTRIBUTOR’S LINK 143 CHRIS DONNELL THE STRAINS OF GLOBAL SUPPLY CHAIN from page 142 Look for our current transportation board to continue to mount pressure on the rail line to fix this growing issue. I think we can all agree, the sooner they do this the better we will be. Now for the trucking industry. Unfortunately, this industry is being directly affected by the weak economy and financial constraints. Financially, we’re seeing an increase in companies being forced into bankruptcy. During and immediately following the pandemic, many companies went out and invested in newer equipment, either to keep up with regulatory compliance or to reduce costs. Then the market quickly turned for the worse. Yearly contracted rates remained elevated yet the spot market tanked, theoretically making contracted rates obsolete. Keep in mind, trucking companies depend on the contracted rates to pay for things like capital investments and when this market dries up, the revenue streams tighten. Thus far, in 2024 we’ve seen some 40,000 non-seasonal jobs eliminated. This is quite the number considering the trucking industry has historically been understaffed and over-performed for years and was just getting to where it needed to be to effectively manage the market volume and capacity. Now a vast majority of those drivers and dock workers have been absorbed into other companies. The downfall is financial. Banks are looking at the industry as a highrisk investment and banks are now starting to decline any financial support. The long-term effect of this will be profound; from decaying equipment to small and medium size enterprises forced out of business with the larger companies controlling more market share. For an industry that is so vital for America, this is troubling news, especially with 90% of all goods moved by truck in this great nation. CHRIS DONNELL