Supply Chain Update

A Period of Much Needed Stability

By Jacob Wright

The supply chain continues to stabilize in 2023. Recent developments have gone as many predicted they would – global demand has fallen, leading to less congestion and more reliable sailings, giving the supply chain a chance to catch up. Freight volume has decreased by 16.6% in Q1 year-over-year; however, demand is starting to tick upwards as the year progresses. It is also important to note that while a 16.6% decrease in freight volume is substantial, this is coming off a period of incredibly high and inflated volume that we saw in 2022, meaning this is more of an adjustment towards equilibrium.

In North America, inland transportation capacity is better than ever post-COVID. Vessel wait times are nearly zero days, and congestion has eased significantly, making many of the COVID-era contingencies no longer necessary. Reliability performance has risen significantly amongst major ocean carriers, with some doubling their rate of reliable scheduling compared to periods in 2022. Severe weather continues to impact certain regions in North America, causing delays up to 15 days in ports like Vancouver and even stretching from areas like the Pacific Northwest to Northern Europe.

In the Asia Pacific market, activity is picking back up after the Chinese New Year. Exports to Europe remain stable with a relatively healthy demand. Exports to North America are seeing better conditions than expected earlier in the year, with a stronger demand recovery taking place on the East Coast. Inland, the flow of goods has been dynamic and healthy with many carriers making moves to meet what will be frequently changing logistic needs.

In Europe, a similar picture is painted like the one in North America, with a couple of exceptions. Ports and terminals remain stable and are seeing less congestion than the previous year, but inland transportation is still experiencing setbacks. In France, a series of strikes have taken place and only just recently ceased for now, causing supply chain activity in the region to experience delays and lead carriers to provide alternative solutions.

The air freight market continues to see a substantial decrease in demand across all regions. The high cost of jet fuel, some strikes at airports over wages, and the increasing reliability of ocean freight has caused many manufacturers to consider air freight a last resort.

Overall, the supply chain developments remain predictable and relatively stable, so far. The most volatile elements are the ongoing geopolitical conflicts that are expected to have domino effects on many regions. It is possible that supply chains will start to be shaped more by geopolitical forces rather than economic ones. Climate change also remains a factor of unpredictability as severe weather disrupts sailings and port activity. Let us hope the supply chain continues down the road of correction and stability for the remainder of 2023. ■