I remember as a child how hard it was to wait for Christmas morning. The tree would be all decorated and ready for the presents to magically appear beneath it. I was told that I just had to wait—it would be only a matter of time before Christmas morning arrived. I just had to be patient.
As we close out 2022, the same could be said for our supply chains. We just need to be patient.
Things are getting better. About a year ago, we had more than 100 ships anchored off the West Coast waiting to dock. The resulting bottlenecks and nonstop consumer demand made it an easy decision to send empties right back to Asia to be refilled with more imports. Container rates rose to their highest levels ever, and exporters were strapped to find enough empty boxes.
Ocean container rates have fallen considerably since the beginning of the year, with each successive month bringing double-digit drops. The rates aren’t quite where shippers want them yet, but they’re moving in the right direction. Carriers also have adjusted. They may not make the record profits of last year, but they’re still doing a healthy business.
In the meantime, needed inventory adjustments are being made. Heading into the holiday season, consumer spending looked to continue to be strong, especially considering that inflation refuses to be tamed. Retailers were still expecting a robust holiday season, despite rising prices and a looming recession.
Freight capacity is also improving, posting the fastest growth ever recorded by the Logistics Managers’ Index (LMI) in October. Because companies are still working through a glut of inventory, the normal freight bump from holiday orders did not appear this year, which also means that the usual peak-season capacity crunch did not materialize. That is certainly good news for shippers, but it may be bad news for smaller carriers, and we might see further consolidation among trucking companies.
Orders for new Class 8 trucks are also strong, and carriers are finally taking delivery of the tractors and trailers they’ve been waiting for. The availability of parts for vehicles and material handling systems is also improving, meaning that some long-delayed automation projects may move from the design board to implementation.
And finally, supply chain planners are adjusting to all of these changes by diversifying suppliers, optimizing freight, and retooling their distribution centers to streamline operations.
So, as we close out 2022 and steam ahead into 2023, there are encouraging signs that things might be getting much better for our supply chains. We just have to be patient a little longer.