Recently Colliers released its analysis of supply chain conditions, in its November report.
The key takeaways in the report include:
- The International longshoremen’s Association, representing dock workers at East and Gulf Coast ports, and the United States Maritime Alliance, representing terminal operators and ocean carriers at said ports, resumed contract negotiations in November 2024.
- Ocean container rates have declined by 42% since August 2024, primarily due to overcapacity, the anticipation of a potential U.S. East Coast dockworker strike and weakened demand.
- All nine major U.S. ports experienced a year-over-year increase in TEU volumes.
Freight Rates
Truckload rates have dropped in recent months, likely due to excess capacity of carriers/trucks, slower consumer spending, seasonal trends and lower fuel prices, acorrding to Coyote Logistics.
Drayage and intermodal service rates were mixed amongst different markets. No significant price change occurred in the parcel and air freight markets. Overall, ocean container rates have decreased by 42% on average since early August. Ocean container rates from Shanghai to Los Angeles/Long Beach decreased by 26%.
Diesel Fuel --$3.54 per gallon (-5.8% since Aug 2024)
LTL -- $442 for a 4,000 pound shipment (-22.6% since Aug 2024)
Parcel -- $17.31 for a 5 pound shipment (no change since Aug 2024)
Air Freight -- $12,988 for a 4,000 pound shipment (-0.9% since Aug 2024)
Intermodal -- $3,070 (+3.6% since Aug 2024)
Ocean -- $4,839 per 40’ container (-25.6% since Aug 2024)
Labor
Overall labor costs have risen 3.9% in the last 12 months, the smallest rise since Q3 2021., according to Reuters.The average salary for a Warehouse Associate II has decreased by 1.2% compared to the previous quarter.
Warehousing jobs have been declining for 17 out of 18 months after hitting their peak in May 2022,aAccording to Freightwaves.com. Since May 2022, total warehouse jobs have decreased from 1,942,200 to 1,764,100 (9.2% decrease).
Supply Chain Best Practices
As inventory can erode a company's profitability if not managed effectively, the report advices companies implement the following business disciplines:
- Demand Forecasting – Quantifying how much inventory should be on hand and where it should be located at the SKU level
- SKU Rationalization – Identifying SKUs that are no longer performing and removing them from the inventory portfolio
- Inventory Targeting – Calculating inventory cycle stock, safety stock and reorder points based on forecasted demand
- Supply & Demand Balancing – Ensuring inventory supply is commensurate to forecasted demand to minimize working capital
The benefits of a well-managed inventory management program are as follows:
- Increased Inventory Turns – Putting capital to work and improving shareholder sentiment
- Increased Order Fill Rates – Protecting and expanding market share
- Optimized Working Capital Investment – Unlocking working capital for alternative, positive NPV investments
- Improved Real Estate Utilization – Allowing for accurate facility sizing arithmetic and avoiding unnecessary facility move costs
